Translation of Subsidiary Financial Statements Potter Corporation established Northland Company as a wholly owned subsidiary on January 1, 2000. The currency in the country of North where Northland Company is located is the NC. Balance sheets at January 1, 2000, and December 31, 2000, and the income statement for Northland Company for the year ended December 31, 2000, are 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?

Transcribed Image Text:

Cash NORTHLAND COMPANY BALANCE SHEETS JANUARY 1 AND DECEMBER 31, 2000 Dec. 31, 2000 NC 70,000 100.000 150,000 Jan. 1, 2000 NC 50.000 90.000 120,000 300,000 NC 560,000 Accounts receivable Inventory Buildings and equipment (net) 400.000 Total assets NC 720,000 Accounts payable NC 60,000 Bonds payable 400,000 Common stock 200,000 Retained earnings 60,000 NC 720,000 NC 560,000 NC 110,000 250,000 200,000 Total liabilities and owners' equity Sales Cost of goods sold NORTHLAND COMPANY INCOME STATEMENT YEAR ENDED DECEMBER 31, 2000 NC 800,000 (520,000) 280,000 Gross margin Salary and wages Depreciation expense Other operating expenses Net income NC 100,000 30,000 90,000 (220,000) NC 60,000