51. Briefly explain the following terms associated with accounting for foreign entities:

51. Briefly explain the following terms associated with accounting for foreign entities:

a) Functional Currency
b) Translation
c) Remeasurement

 

52. On January 1, 2008, Pace Company acquired all of the outstanding stock of Spin PLC, a British Company, for $350,000. Spin’s net assets on the date of acquisition were 250,000 pounds (£). On January 1, 2008, the book and fair values of the Spin’s identifiable assets and liabilities approximated their fair values except for property, plant, and equipment and trademarks. The fair value of Spin’s property, plant, and equipment exceeded its book value by $25,000. The remaining useful life of Spin’s equipment at January 1, 2008, was 10 years. The remainder of the differential was attributable to a trademark having an estimated useful life of 5 years. Spin’s trial balance on December 31, 2008, in pounds, follows:

Additional Information
1 Spin uses the FIFO method for its inventory. The beginning inventory was acquired on December 31, 2007, and ending inventory was acquired on December 26, 2008. Purchases of £300,000 were made evenly throughout 2008.
2 Spin acquired all of its property, plant, and equipment on March 1, 2006, and uses straight-line depreciation.
3 Spin’s sales were made evenly throughout 2008, and its operating expenses were incurred evenly throughout 2008.
4 The dividends were declared and paid on November 1, 2008.
5 Pace’s income from its own operations was $150,000 for 2008, and its total stockholders’ equity on January 1, 2008, was $1,000,000. Pace declared $50,000 of dividends during 2008.
6 Exchange rates were as follows:

 

 

53. Use the information given in question 52 to prepare a schedule providing a proof of the translation adjustment.

 

54. Refer to the information in question 52. Assume the U.S. dollar is the functional currency, not the pound.

55. Refer to the information in question 52. Assume the U.S. dollar is the functional currency, not the pound. Prepare a schedule providing a proof of the remeasurement gain or loss. Assume that the British subsidiary had the following monetary assets and liabilities at January 1, 2008:

 

56. Parisian Co. is a French company located in Paris. Yankee Corp., located in New York City, acquires Parisian Co. Parisian has the Euro as its local currency and the Swiss Franc as its functional currency. Yankee has the U.S. dollar as its local currency and the U.S. dollar as its functional currency.