Question

In: Finance

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.

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 1 year ago

Paton Corporation, a U.S. corporation, owns 100 percent of the stock of Tappan Ltd, a British...

Paton Corporation, a U.S. corporation, owns 100 percent of the stock of Tappan Ltd, a British corporation, and 100 percent of the stock of Monroe N.V., a Dutch corporation. Monroe has post-1986 undistributed earnings of €726 and post-1986 foreign income taxes of $484. Tappan has post-1986 undistributed earnings of £968 and post-1986 foreign income taxes of $242. During the current year, Tappan paid Paton a dividend of £520, and Monroe paid Paton a dividend of €520. The dividends were exempt...

Hylie, a U.S. corporation, owns 100% of Frosan, a French firm. Assume that the dollar is...

Hylie, a U.S. corporation, owns 100% of Frosan, a French firm. Assume that the dollar is the functional currency, although the books are kept in euros. Required: What currency exchange rate would be used to re-measure Frosan's balance sheet into U.S. dollars? Choose from current, simple average, weighted average, or historical. a. Cash _____________________ b. Accounts Receivable _____________________ c. Inventory, carried at cost _____________________ d. Equipment _____________________ e. Accumulated Depreciation _____________________ f. Bonds Payable _____________________ g. Common Stock _____________________ h....

The Williams Company, a U.S.-based company, owns 100% of a European Subsidiary (ES). The investment in...

The Williams Company, a U.S.-based company, owns 100% of a European Subsidiary (ES). The investment in ES totals $10 million (euros 13.5 million) as of the end of Year 1. This represents an initial investment of $6 million and retained earnings of $4 million. The Currency Translation Adjustment (CTA) account included in Other Comprehensive Income (OCI) totals $1 million (loss) at the end of Year 1. During Year 2, Williams decided to sell 25% of ES to the Tremont Company,...

The New Zealand dollar to U.S. dollar exchange rate is 1.34 , and the British pound...

The New Zealand dollar to U.S. dollar exchange rate is 1.34 , and the British pound to U.S. dollar exchange rate is .63. If you find that the British pound to New Zealand dollar were trading at .51 , what would be the riskless profit per U.S. dollar invested?

Bellingham Corporation, a U.S. company, acquired a 100% interest in Kayno Manufacturing, a Japanese company, on...

Bellingham Corporation, a U.S. company, acquired a 100% interest in Kayno Manufacturing, a Japanese company, on December 31, 2017, when the exchange rate for the Japanese yen (JPY)) was 103.960. Kayno’s functional currency is the Japanese Yen. Relevant exchange rates for JPY are: Japanese yen Current rate December 31,2018 ¥101.94 Current rate December 31,2017 ¥103.96 Average rate for 2018 ¥103.03 March 31, 2018 ¥102.34 Rate when dividends were paid ¥103.75 Kanyo Adjusted trial balance December 31, December 31, 2017 2018...

Delta corporation owns 2% of the stock in a U.S. corporation Azul. It receives a dividend...

Delta corporation owns 2% of the stock in a U.S. corporation Azul. It receives a dividend from that corporation of $100,000. Delta has $3 million of taxable income not including the dividend from Azul. a) Suppose that before the dividends Delta had a taxable loss from all other activities of ($40,000). How much gross income from the dividend does Delta report? b)What if Delta’s taxable loss before dividends was ($55,000) would your answer change and if so how?

4. Todor owns a U.S. corporation that operates a subsidiary corporation in Bulgaria. Because of the...

4. Todor owns a U.S. corporation that operates a subsidiary corporation in Bulgaria. Because of the world wide tax approach adopted in the United States, all income of the Bulgarian subsidiary is potentially taxed twice, once in Bulgaria and again in the United States. Name and provide a brief description of the adjustments available on the U.S. return of the parent corporation which mitigate the impact of this potential double tax on all Bulgarian income?

Nancy Pelosi formed a new corporation which she owns 100% on January 1, 2017, Losing Is...

Nancy Pelosi formed a new corporation which she owns 100% on January 1, 2017, Losing Is My New Role, Inc. She contributed an e-mail server to the corporation. The e-mail server had a basis of $90,000. The e-mail server had a debt on it of $150,000 which was contributed along with the server. The e-mail server had a fair market value of $190,000 based upon its value as a collectible as Nancy Pelosi was not the original owner. Pelosi owned...

LN Corporation, a U.S corporation, owns all the stock of Foreign Sub 1, a foreign corporation....

LN Corporation, a U.S corporation, owns all the stock of Foreign Sub 1, a foreign corporation. Foreign Sub 1 in turn owns 20% of the voting stock of Foreign Sub 2, also a foreign corporation. LN Corporation also owns 10% of the nonvoting common stock of Foreign Sub 2 but owns no voting stock in Foreign Sub 2. During the current year, Foreign Sub 2 pays dividends on its nonvoting common stock, but pays no dividends on its voting stock....

Green Corporation owns 100% of the stock of Yellow Corporation (all common) with a basis of...

Green Corporation owns 100% of the stock of Yellow Corporation (all common) with a basis of $100. Yellow Corporation owns a rental building (its only asset) with a gross FMV of $1,000, subject to a nonrecourse mortgage of $400. Yellow’s adjusted basis in this building is $300. Yellow has $200 of E&P. Yellow is on the accrual method of accounting and reports on the calendar year. Yellow Corporation and Green Corporation do not report on a consolidated basis. Yellow Corporation...