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On January 1, 2013, Pride, Inc During 2013, Pride Bought Inventory for $112,000 and Sold It

question 52

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On January 1, 2013, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill which has not been impaired. As of December 31, 2013, before preparing the consolidated worksheet, the financial statements appeared as follows: $\begin{array}{lcc}&\text { Pride, Inc.}&\text { Strong Corp. }\\\text { Revenues } & \$ 420,000 & \$ 280,000 \\\text { Cost of goods sold } & (196,000) & (112,000) \\\text { Operating expenses } & \quad(28,000) & (14,000) \\\text { Net income } & \$ \quad 196,000 & \$ 154,000\\\\\text { Retained earnings, 1/1/13 } & \$ 420,000 & \$ 210,000 \\\text { Net income (above) } & 196,000 & 154,000 \\\text { Dividends paid } & 0 &0 \\\text { Retained earnings, 12/31/13 } & {\$ 616,000}& \$ 364,000\\\\\text { Cash and receivables } & \$ 294,000 & \$ 126,000 \\\text { Inventory } & 210,000 & 154,000 \\\text { Investment in Strong Corp } & 364,000 & 0 \\\text { Equipment (net) } & 616,000 & \underline{420,000} \\\text { Total assets } & \$ 1,484,000 & \$ 700,000\\\\\text { Liabilities } & \$ 588,000 & \$ 196,000 \\\text { Common stock } & 280,000 & 140,000 \\\text { Retained earnings, 12/31/13 (above) } & 616,000 & 264,000\\\text { Total liabilities and stockholders' equity } & \$ 1,484,000 & \$ 700,000 \\\end{array}$ During 2013, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of this purchase had been paid for by Strong by the end of the year. 60% of these goods were still in the company's possession on December 31, 2013.
What is the consolidated total for equipment (net) at December 31, 2013?

Definitions:

Translation Exposure

The potential risk of value change in a company's financial statements due to the conversion of foreign currencies into the domestic currency in consolidation.

Exchange Rate Risk

The potential for investors or companies to experience losses due to fluctuations in the exchange rates between currencies.

Net Present Value

A calculation that compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account; used in capital budgeting to analyze the profitability of an investment or project.

Forward Exchange Rate

The exchange rate at which two parties agree to exchange currencies at a future date.