Parent Co. acquired 80% of its foreign subsidiary for fc4,800 at the beginning o
ID: 2498542 • Letter: P
Question
Parent Co. acquired 80% of its foreign subsidiary for fc4,800 at the beginning of the year when the subsidiary had owner's equity of fc5,000. The subsidiary earned fc500 during the year. How much comprehensive income will in Parent Co.'s investment in subsidiary account at the end of the year before beginning the consolidation process if the equity method is used?
Exchange rates:
Beginning rate: 2.80 / Average rate: 2.50 / Dividend declaration rate: 2.25 / Dividend payment rate: 2.10 / Ending rate: 2.00
Explanation / Answer
Comprehensive income in Parent Co.'s investment in subsidiary account at the end of the year before beginning the consolidation process
if the equity method is used is
= (Investments + share in subsidiary's income) * Ending rate
= (4800 + 0.8 * 500) * 2
= $10400
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