13.5Pike Corporation, a U.S. Company, formed a subsidiary with a new company in London on January 1, 2014, by investing 500,000 British pounds in exchange for all of the subsidiary’s common stock. The subsidiary purchased land for 100,000 pounds and a building for 300,000 pounds on July 1, 2014. The building is being depreciated over a 40-year life by the straight-line method. The inventory is valued on an average cost basis. The British pound is the subsidiary’s functional currency and its reporting currency and has not experienced any abnormal inflation. Exchange rates for the pound on various dates were:January 1, 20141 pound = 1.81July 1, 20141 pound = 1.86December 31, 20141 pound = 1.832014 average rate1 pound = 1.82The subsidiary’s adjusted trial balance is presented below for the year ended December 31, 2014.DebitsIn PoundsCash200,000Accounts receivable60,000Inventory80,000Land100,000Building300,000Depreciation expense3,750Cost of goods sold213,750Other expenses90,000Total debits1,047,500CreditsAccumulated depreciation3,750Accounts payable84,000Accrued liabilities16,750Common stock500,000Retained earnings- 0 Sales revenue443,000Total credits1,047,500Required: Prepare the subsidiary’s:A.Translated workpapers (round to the nearest dollar)B.Translated income statementC.Translated balance sheet13.6Using the information provided in Problem 13-5, use the temporal method instead of the current ratemethod.Required: Prepare the subsidiary’s:A.Translated workpapers (round to the nearest dollar)B.Translated income statementC.Translated balance sheet - 13-9
Test Bank to accompany Jeter and Chaney Advanced Accounting 13-7On January 1, 2014, Roswell Systems, a U.S.-based company, purchased a controlling interest in Bern Management Consultants located in Bern, Switzerland. The acquisition was treated as a purchase transaction. The 2014 financial statements stated in Swiss francs are given below.BERN MANAGEMENT CONSULTANTSComparative Balance SheetsJanuary 1 and December 31, 2014Jan. 1 Dec. 31Cash and Receivables30,00084,000Net Property, Plant, and Equipment60,00056,000Totals90,000140,000Accounts and Notes Payable45,00050,000Common Stock30,00030,000Retained Earnings15,00060,000Totals90,000140,000BERN MANAGEMENT CONSULTANTSConsolidated Income and Retained Earnings StatementFor the Year Ended December 31, 2014Revenues112,000Operating Expenses including depreciation of 5,000 francs45,000Net income67,000Dividends Declared and Paid22,000Increase in Retained Earnings45,000Direct exchange rates for Swiss franc are:U.S. Dollars per FrancJanuary 1, 2014$0.9987December 31, 20140.9321Average for 20140.9654Dividend declaration and payment date0.9810Required:A.Translate the year-end balance sheet and income statement of the foreign subsidiary using the currentrate method of translation.B.Prepare a schedule to verify the translation adjustment. Short Answer
You've reached the end of your free preview.
Want to read all 20 pages?