Prepare a schedule providing a proof of the translation adjustment using the information provided below.
On January 1, 20X8, 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, 20X8, 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, 20X8, 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, 20X8, in pounds, follows:
| Debits | Credits | |
|---|---|---|
| Cash | £ 70,000 | |
| Accounts Receivable (net) | 100,000 | |
| Inventory | 120,000 | |
| Property, Plant, and Equipment | 330,000 | |
| Accumulated Depreciation | £ 120,000 | |
| Accounts Payable | 110,000 | |
| Notes Payable | 90,000 | |
| Common Stock | 100,000 | |
| Retained Earnings | 150,000 | |
| Sales | 420,000 | |
| Cost of Goods Sold | 270,000 | |
| Operating Expenses | 60,000 | |
| Depreciation Expense | 30,000 | |
| Dividends Paid | 10,000 | |
| Total | £ 990,000 | £ 990,000 |
Additional Information
Spin uses the FIFO method for its inventory. The beginning inventory was acquired on December 31, 20X7, and ending inventory was acquired on December 26, 20X8. Purchases of £300,000 were made evenly throughout 20X8.
Spin acquired all of its property, plant, and equipment on March 1, 20X6, and uses straight-line depreciation.
Spin's sales were made evenly throughout 20X8, and its operating expenses were incurred evenly throughout 20X8.
The dividends were declared and paid on November 1, 20X8.
Pace's income from its own operations was $150,000 for 20X8, and its total stockholders' equity on January 1, 20X8, was $1,000,000. Pace declared $50,000 of dividends during 20X8.
Exchange rates were as follows:
| March 1, 20X6 | 1£ = $ 1.20 |
|---|---|
| December 31, 20X7 | 1£ = $ 1.25 |
| January 1, 20X8 | 1£ = $ 1.25 |
| November 1, 20X8 | 1£ = $ 1.26 |
| December 26, 20X8 | 1£ = $ 1.31 |
| December 31, 20X8 | 1£ = $ 1.35 |
| Average for 20X8 | 1£ = $ 1.30 |
Required:
Prepare a schedule providing a proof of the translation adjustment.