Wellington Corporation is a New Zealand company. Wellington is a wholly-owned su

Question

Wellington Corporation is a New Zealand company. Wellington is a wholly-owned subsidiary of Amherst, Incorporated, an American firm. Wellington Corporation keeps its books using the New Zealand dollar (NZD). Amherst, Incorporated keeps its books using the United States dollar (USD). Wellington Corporation's financial statements require translation from NZD to USD so that consolidated financial statements for 2017 can be prepared. Financial statements (before translation) for Wellington Corporation for 2017 are presented on the next page of this exam. That page also contains some exchange rates that you may or may not need in completing the problem. The exchange rates are stated in terms of number of USD for one NZD (that is, they are direct quotes). Required: Starting with Wellington's financial statements on the next page, prepare translated financial statements for Wellington Corporation from NZD to USD. Use the temporal method to perform the translation. Show work and the translated financial statements on the next page of this exam. In completing this problem, please note the following: Assume that Wellington Corporation uses the FIFO cost flow assumption for valuing inventory, and that all inventory was acquired when one New Zealand dollar costs three U.S. dollars (USD 300 per NZD). Assume further that there is no change between beginning and ending inventory for the year ended December 31, 2017. Assume that the translated balance of Wellington Corporation's retained earnings at December 31, 2016 was USD 2,500.

Explanation / Answer

Wellington Corpotation Subsidiary of Amherest, incorporated Balance sheet december 31,2017 Amount in NZD Exchange rate Amount in $ Cash 3000 $5 $           15,000.00 Account receivables 1500 $5 $             7,500.00 Inventories 2000 $3 $             6,000.00 Equipment (net of depreciation) 6000 $2 $           12,000.00 land 2500 $2 $             5,000.00 Total 15000 $           45,500.00 Acounts payables 2000 $5 $           10,000.00 bonds payables 3000 $5 $           15,000.00 Common Stock 5500 $2 $           11,000.00 Retained Earnings 4500 $             9,500.00 Total 15000 $           45,500.00 Wellington Corpotation Subsidiary of Amherest, incorporated Income statement for the year ended december 31,2017 Amount in NZD Exchange rate Amount in $ revenue 6000 $4.50 $           27,000.00 cost of goods sold -2000 $3 $            -6,000.00 depreciation -1500 $2 $            -3,000.00 Other expenses -1000 $4.50 $            -4,500.00 Net income 1500 $           13,500.00 net income + Opening retained earnings =$13500+$2500 =$16000 Ending retained balance = Total Assets -Total Liabilities - Common Stock =$45,500- ($10,000+$15,000) - $11,000 =$9500 The difference treated as Devidec declared and paid =$16000-$9500 =$6500

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