Translation of Subsidiary Financial Statements Assume that Potter Corporation created Northland Company as a wholly owned subsidiary on January 1, 2000, and that its Operating results for 2000 and its balance sheets at January 1 and December 31, 2000, are as presented in E16-28. In this case, it is assumed the relevant exchange rates for 2000 declined as follows:

a. Prepare a translated income statement for Northland Company for the year 2000.

b. Prepare translated balance sheets for Northland Company at January 1, 2000, and December 31, 2000.

c. Should the translation adjustment reported in the balance sheet at December 31, 2000, be positive or negative? Explain.

d. What dollar amount did Potter Corporation invest when it started Northland?

e. If Potter Corporation liquidated Northland Company at December 31, 2000, by selling Northland’s assets at book value and immediately paying its liabilities, what dollar amount would Potter receive? Would Potter Corporation recognize a gain or a loss on the liquidation? What amount?

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January 1, 2000 December 31, 2000 Average rate for year 2000 $0.80 U.S. 1 NC 1 NC = $0.72 U.S. 1 NC $0.75 U.S. =