Refer to the data in Exercise E12–5.

Required

a. Prepare a proof of the translation adjustment computed in Exercise E12–5.

b. Where is the translation adjustment reported on Popular Creek’s consolidated financial statements and its foreign subsidiary?

Data from Exercises 5

On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 60,000. SunTime’s December 31, 20X1, trial balance in SFr is as follows:

Additional Information

1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek’s books show a $4,000 payable to SunTime.

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.

Transcribed Image Text:

Cash Accounts Receivable (net) Receivable from Popular Creek Inventory Plant & Equipment Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Sales Cost of Goods Sold Depreciation Expense Operating Expense Dividends Paid Total Debit SFr 7,000 20,000 5,000 25,000 100,000 70,000 10,000 30,000 15,000 SFr 282,000 Credit SFr 10,000 12,000 50,000 60,000 150,000 SFr 282,000