(Estimated Time: 55 to 65 Minutes) Arlington Company is a US.-based organization
ID: 2459274 • Letter: #
Question
(Estimated Time: 55 to 65 Minutes) Arlington Company is a US.-based organization with numerous for- eign subsidiaries. As a preliminary step in preparing consolidated financial statements for 2011, it must translate the financial information from each foreign operation into its reporting currency, the U.S. dollar. Arlington owns a Swedish subsidiary that has been in business for several years. On December 31 2010, this entity's balance sheet was translated from Swedish kroner (SEK) (its functional currency) into U.S. dollars as prescribed by U.S. GAAP Equity accounts at that date follow (all credit balances): Common stock Retained earnings Cumulative translation adjustment SEK 110,000 $21,000 194,800 36,100 At the end of 2011, the Swedish subsidiary produced the following trial balance. These figures in- clude all of the entity's transactions for the year except for the results of several transactions related to sales made to a Chinese customer. A separate ledger has been maintained for these transactions denom- inated in Chinese renminbi (RMB). This ledger follows the company's trial balance. Trlal Balance-Swedish Subsidlary December 31, 2011 Credit SEK 41,000 Accounts Receivable Fixed Assets 228,000 SEK 98,100 Accounts Payable Notes Payable Bonds Payable Common Stock Retained Earnings, 1/1/11 56,000 125,000 110,000 194,800 350,000 Cost of Goods Sold Depreciation Expense Salary Expense Rent Expense Other Expenses Dividends Paid, 7/1/11 165,000 10,900 36,000 12,000 41,000 25,000 SEK 972,900 SEK 972,900Explanation / Answer
Financial Stataement as on December 31, 2011 of Swedish subsidiary Liabilities Amount Assets Amount Common Stock 110000 Land 160000 Retained Earnings 194800 FixedAssets 228000 Add : Profit During Year 109720 304520 Less : Accumulated Depreciation -98100 -15060 Loan in RMB 15000*1.04 15600 20800 Bonds Payable 125000 -4160 Accunts Payable 39000 10000 141480 Notes Payable 56000+15000*1.04 71600 Inventory 128000 Accounts Recivable 126000+28000*1.04 155120 Cash 41000+10000*1.04-5000*1.10-10000 35900 Cumulatiive Translation adjustment 45220 Total 665720 Total 665720 Profit & Loss A/c For the Year Ended December 31, 2011 Expenses Amount Incomes Amount Sales 350000+44000*1.16 401040 To Cost of Goods Sold 165000 To Gross Profit 236040 401040 401040 By Gross Profit 236040 Gain on Loan Foreign Currency RMB 5000*(1.25-1.10) 3900 To Depreciation 10900+4000*1.04 15060 To Salary 36000 To Rent 12000 To Other Expense 41000 To interest 1000*1.16 1160 To Net profit 134720 239940 239940 To Dividend 25000 By Net Profit 134720 To trf to Balance Sheet 109720 134720 134720
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