On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a su
ID: 2342337 • Letter: O
Question
On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 76,000. RoadTime’s December 31, 20X1, trial balance in SFr is as follows:
302,600
Additional Information
1.
The receivable from Popular Creek is denominated in Swiss francs. Popular Creek’s books show a $5,500 payable to RoadTime.
2.
Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1.
3.
Equipment is depreciated by the straight-line method with a 10-year life and no residual value. A full year’s depreciation is taken in the year of acquisition. The equipment was acquired on March 1.
4. The dividends were declared and paid on November 1.
5. Exchange rates were as follows:
6. The Swiss franc is the functional currency.
Required:
a.
Prepare a proof of the translation adjustment.
b.
Where is the translation adjustment reported on Popular Creek’s consolidated financial statements and its foreign subsidiary? (Select all that apply.)
*Cash flow statement
*statement of financial position
*income statement
*statement of comprehensive income
*statement of retained earnings
Debit Credit Cash SFr 8,800 Accounts Receivable (net) 24,500 Receivable from Popular Creek 6,500 Inventory 27,000 Plant & Equipment 103,000 Accumulated Depreciation SFr 11,700 Accounts Payable 12,300 Bonds Payable 53,000 Common Stock 76,000 Sales 149,600 Cost of Goods Sold 71,000 Depreciation Expense 11,700 Operating Expense 34,500 Dividends Paid 15,600 Total SFr 302,600 SFr302,600
On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 76,000. RoadTime's December 31, 20x1, trial balance in SFr is as follows: Additional Information The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $5,500 payable to RoadTime. Purchases of inventory goods are made evenly during the year Items in the ending inventory were purchased November 1 Equipment is depreciated by the straight-line method with a 10 year life and no residual value. A full year's depreciation is taken in the year of acquisition. The equipment was acquired on March The dividends were declared and paid on November 1 The Swiss franc is the functional currency Required: Prepare a proof of the translation adjustment Where is the translation adjustment reported on Popular Creek's consolidated financial statements and its foreign subsidiary? Select all that apply.)Explanation / Answer
a.
B. Translation adjustment reported in
*income statement
POPULAR CREEK CORPORATION AND SUBSIDIARY Proof of Translation Adjustment Year Ended December 31, 20X1 SFR U.S Dollars Net assets at beginning of year 76,000*0.73 55,480 Adjustment for changes in net asset position during year: Net income for year (149,600-71,000-11,700-34,500) 32,400*.075 24,300 Dividends paid (15,600*0.77) (12,012) Net assets translated at: 92,800 67,768 Rates during yearRelated Questions
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