Kingsfield starts a subsidiary operation in a foreign country on January 1, 2011. The country’s currency is the kumquat (KQ). To start this business, Kingsfield invests 10,000 kumquats. Of this amount, it spends 3,000 kumquats immediately to acquire equipment. Later, on April 1, 2011, it also purchases land. All subsidiary operational activities occur at an even rate throughout the year. The currency exchange rates for the kumquat for this year follow:

A corporation based in East Lansing, Michigan, Kingsfield uses the U.S. dollar as its reporting currency.

a. Assume that the subsidiary’s functional currency is the kumquat. Prepare a trial balance for it in U.S. dollars so that consolidated financial statements can be prepared.

b. Assume that the subsidiary’s functional currency is the U.S. dollar. Prepare a trial balance for it in U.S. dollars so that consolidated financial statements can be prepared.

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$1.71 1.59 1.66 1.64 1.62 January 1, 2011 April 1, 2011 June 1, 2011 Weighted average-2011 December 31, 2011 As of December 31, 2011, the subsidiary reports the following trial balance: Cash Debits KQ 8,000 Credits Accounts Receivable 9,000 Equipment 3,000 Accumulated Depreciation KQ 600 Land 5,000 Accounts Payable 3,000 Notes Payable (due 2014) 5,000 Common Stock 10,000 Dividends Paid (6/1/11) 4,000 Sales 25,000 Salary Expense 5,000 Depreciation Expense 600 Miscellaneous Expenses 9,000 Totals KQ 43,600 KQ 43,600