Question 1: On January 1, 2003, Musial Corp. sold equipment to Martin Inc. (a wholly-owned subsidiary) for $168,000 in cash. The equipment had originally cost $140,000 but had a book value of only $98,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense was calculated using the straight-line method.
Musial earned $308,000 in net income in 2003 (not including any investment income) while Martin reported $126,000. Assume there is no amortization related to the original investment.
Required:
What is consolidated net income for 2003?
Question 2: A U.S. company executed a series of transactions in a foreign country during 2004. The appropriate exchange rates during 2004 were as follows:
|
|
Exchange
|
|
Date
|
Rate
|
|
June 1, 2004
|
$.62 = §1
|
|
August 1, 2004
|
$.66 = §1
|
|
October 1, 2004
|
$.72 = §1
|
|
November 1, 2004
|
$.77 = §1
|
|
December 31, 2004
|
$.78 = §1
|
The following transactions occurred during 2004:
June 1 Bought inventory of §20,000 on credit.
Aug. 1 Sold all inventory for §30,000 on credit.
Oct. 1 Paid §10,000 on the June 1 purchase.
Nov. 1 Collected §10,000 from the August 1 sale.
Required:
Prepare all journal entries in U.S. dollars along with any December 31, 2004 adjusting entries.