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D’Jais Corporation, a U.S. company, owns 100% of Bar A Corporation, a New Zealand company. Bar...

D’Jais Corporation, a U.S. company, owns 100% of Bar A Corporation, a New Zealand company. Bar A's equipment was acquired on the following dates (amounts are stated in New Zealand dollars):

Jan. 1, 2017 purchased equipment for 40,000 NZ dollars

Jul. 1, 2017 purchased equipment for 80,000 NZ dollars

Jan. 1, 2018 purchased equipment for 50,000 NZ dollars

Jul. 1, 2018 sold equipment purchased on Jan. 1, 2017 for 35,000 NZ dollars

Exchange rates for the NZ dollar on various dates are:

Jan. 1, 2017 $.500 Jan. 1, 2018 $.530

Jul. 1, 2017 $.520 Jul. 1, 2018 $.505

Dec. 31, 2017 $.530 Dec. 31, 2018 $.490

2017 avg. rate $.515 2018 avg. rate $.510

Bar A's equipment has an estimated 5-year life with no salvage value and is depreciated using the straight-line method, calculating depreciation expense on a monthly basis. Bar A's functional currency is the U.S. dollar, but the company uses the NZ dollar for recordkeeping.

Required:

1. Determine the value of Bar A's equipment account on December 31, 2018 in U.S. dollars.

2. Determine Bar A's depreciation expense for 2018 in U.S. dollars.

3. Determine the gain or loss from the sale of equipment on July 1, 2018 in U.S. dollars.

Solutions

Expert Solution

3) Gain or loss form sale of equipment

Sale value - NZ dollars 35,000

Book value on 01 jan 2017 = NZ 40,000

Less depreciation NZ 40,000/60 months ×18 months = NZ 12,000

So book value as on 01 jul 2018 = NZ 28,000

So profit in NZ 35000 - 28000 = NZ 7000

so profit in US $ NZ 7000 × $.505 =$ 3535

2) depreciation expenses for the year 2018

In 2018

1. equipment purchase for NAZ 40,000 on 01 jan 2017 was there only for 6 months in 2018 so depreciation = 40,000/60 months *6 months = NAZ 4000

2. equipment purchase for NAZ 80,000 on 01 July 2017 was there for full year in 2018 so depreciation 80,000/60 months *12 months = NAZ 16,000

3.equipment purchase for NAZ 50,000on 01 jan 2018 was there for full year in 2018 so depreciation 50,000/60 months *12months =NAZ 10,000

So total depreciation for the year 2018 In NAZ 30,000

AND IN U.S. DOLLARS naz 30,000* $.510 = $15,300

1)Depreciation for the year 2017

Purchase on 01 jan 2017 - depreciation NAZ 40,000/60months *12months =NAZ 8000

PURCHASE ON 01 July 2017 - depreciation NAZ 80,000/60months *6months =NAZ 8000

so total depreciation for the year 2017 NAZ 16000

So book value at 31 March 2018

Total purchase value NAZ 1,70,000

Less :- depreciation for the year 2017 NAZ 16,000

Less :- depreciation for the year 2018 NAZ 30,000

LESS :- book value of assets sold NAZ 28,000

book value as on 31march 2018 NAZ 96,000

BOOK VALUE in $ = 96,000*$.490 = $47,040

jeff jeffy answered 10 months ago

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