Q1) Slag Corporation borrowed $10,000,000 from its parent, PFG Industries, on May 1, 2016. The yearly interest rate is 6%, and interest is due semiannually on April 30 and October 31 of each year. The principal of the loan is due on April 30, 2021. PFG's accounting year ends December 31. It is now December 31, 2016, and Slag has made interest payments as required.
Required - What balances appear in the December 31, 2016, trial balances of PFG and Slag with respect to this intercompany loan? What balances should appear on the consolidated financial statements?
Prepare the working paper eliminating entries needed for this intercompany loan at December 31, 2016.
Q2) Paris Corporation acquired Sierra Company at the beginning of the current year. Total retail value of upstream sales for the year were $65,000; the retail value of downstream sales were $25,000. Sierra sells to Paris at a markup of 35% on cost; Paris sells to Sierra at a markup of 30% on sales price. Upstream sales of $13,500 remain in Paris' ending inventory. Downstream sales of $6,000 remain in Sierra's ending inventory.
Required - Calculate the unconfirmed profit in Paris' ending inventory and in Sierra's ending inventory.
Prepare the working paper eliminating entries for the intercompany inventory transactions that are required to consolidate the trial balances of Paris and Sierra for the year.
Q3) A Venezuelan subsidiary owns land acquired for 100,000,000 bolivares fuertes (Bs.F) when the exchange rate was $0.50/Bs.F. The rate at the end of the current year is $0.05, and the price level index has increased from 100 at the date the land was acquired to 1200 at the end of the current year. The subsidiary's functional currency is the Bs.F. The parent's reporting (presentation) currency is the U.S. dollar.
Required - At what value will the land be reported in the consolidated balance sheet, if the subsidiary's parent follows U.S. GAAP and Venezuela is not considered to be a highly inflationary country? At what value will the land be reported in the consolidated balance sheet, if the subsidiary's parent follows IFRS and Venezuela is not considered to be a highly inflationary country?
At what value will the land be reported in the consolidated balance sheet, if the subsidiary's parent follows U.S. GAAP and Venezuela has been declared a highly inflationary country?
At what value will the land be reported in the consolidated balance sheet, if the subsidiary's parent follows IFRS and Venezuela has been declared a highly inflationary country?
If you answered Parts b. and c. correctly, when hyperinflation exists the land is reported at different amounts depending on if the parent follows U.S. GAAP or IFRS. Under what circumstances will the U.S. GAAP and IFRS amounts be the same?