Part A

A foreign currency transaction refers to a business transaction denominated in a currency other than a company's functional or home currency. The French corporation has exported electronic equipment to the USA in a transaction denominated in the dollar, not its functional currency. Thus, this transaction can be termed as a foreign currency transaction.

A foreign transaction refers to an international transaction that involves the transfer of funds that crosses national borders. In this transaction, the $ amount is being transferred from the USA to France. Thus, this is a Foreign transaction.

 

Part B

c. In this, the entity recognizes unrealized losses or gains on the selling price and cost of the consolidated entity.

If the assets are kept inside the combined organization, unrealized profits and losses from intercompany sales of depreciable assets are realized by usage. Assets are marketed to third parties via asset sales. The method of remembering previously unrealized profits and losses from use is done piecemeal over the depreciable asset's remaining useful life.

 

Part C

Elimination Entries:

1.

Income from Skelly $23,000

NCI 1000

Dividends Declared-Skelly $10,000

Investment in Skelly 14,000

To eliminate income and dividends from Skelly.

2.

Capital Stock $50,000

Retained Earnings-Jan. 1. 25,000

.Investment in Skelly $67,500

.NCI 7,500

To eliminate equity accounts of Skelly at the beginning of the year.

3.

Goodwill. $25,000

.Investment in Skelly. $23,000

.NCI $2,500

To allocate unamortized difference.

4.

Sales$30,000

.Cost of Goods Sold$30,000

To eliminate intercompany sales.

5.

Cost of Goods Sold$3,000

Inventory$3,000

To eliminate unrealized profit in ending inventory.

6.

Investment in Skelly.$2,000

Cost of Goods Sold$2,000

To eliminate realized profit in beginning inventory.

7.

Accounts Payable$7,500

Receivables$7,500

To eliminate the amounts owed by Skelly.

8.

Gain on sale of equipment$4,000

Equipment$4,000

To eliminate the intercompany gain from the sale of equipment.

9.

Equipment.1000

Other Expenses.1000

To eliminate the excess depreciation.

10.

NCI in CI of Subsidiary$2,800

.NCI$2,800

To recognize NCI in Skelly's Adjusted CI

Philly	Skelly	Eliminations	Consolidate
		Debit	Credit
Income Statement
Sales	$300,000	$70,000	4. $30,000		$340,000
Income from Skelly	25,000		1. 13,000		-
Gain on Equipment Sale	4,000		8. 4,000		-
Cost of Sales	(130,000)	(22,000)		4. 30,000
			5. 3,000
				6. 2,000	(123,000)
Other Expenses	(70,000)	(9,000)		9. 1000	(157,000)

 

 

 

 

Non-controlling Interest			10. 2,800		(2,800)
Net Income	$57,000	$30,000			$57,200
Retained Earnings 1/1	$47,500	$25,000	2. 25,000		$47,500
Add: Net Income	28,500	30,000			57,200
Dividends	(35,000)	(10,000)		1. 10,000	(35,000)
Retained Earnings 12/31	$69,500	$25,000			$69,700
Balance Sheet
Cash	$27,500	$15,000			$21,250
Receivables	35,000	20,000		7. 7,500	47,500
Inventories	50,000	22,500		5. 3,000	69,500

 

 

 

 

 

Equipment,net	120,000	45,000		8. 4,000
			19000		162,000
Land	20,000	17500			37,500
Investment in Skelly	102,000			1. 14,000
				2. 67,500
				3. 22,500
			6. 2,000		-
Goodwill			3. 25,000		25,000
Total Assets	$354,500	$120,000			$384,000

 

Liabilities and Equity
Accounts Payable	$35000	$25000	7. 7500		$52500
Capital Stock	250,000	50,000	2. 50,000		250,000
Retained Earnings	69,500	45000			6700
1/1 Noncontrolling Interest
12/31 Non-controlling Interest			1. 1000
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