P 14-3 Translation worksheet, parent accounting Pyl acquired all the outstanding capital stock of Soo of London on January 1, 2016, for $800,000, when the exchange rate for British pounds was $1.50 and Soo’s stockholders’ equity consisted of £400,000 capital stock and £100,000 retained earnings. Soo’s functional currency is the British pound. Balance sheet accounts for Soo at January 1, 2016, in British pounds and U.S. dollars are summarized as follows:

British Pounds Exchange Rate U.S.

Dollars Cash £ 50,000 $1.50 $ 75,000 Accounts receivable—net 60,000 1.50 90,000 Inventories 40,000 1.50 60,000 Equipment 750,000 1.50 1,125,000

£900,000 $1,350,000 Accumulated depreciation £250,000 $1.50 $ 375,000 Accounts payable 150,000 1.50 225,000 Capital stock 400,000 1.50 600,000 Retained earnings 100,000 1.50 150,000

£900,000 $1,350,000 Exchange rates for 2016 are as follows:

Current exchange rate, January 1, 2016 $1.50 Average exchange rate for 2016 1.53 Rate for cash dividends 1.62 Current exchange rate, December 31, 2016 1.55 Soo’s adjusted trial balance in British pounds at December 31, 2016, is as follows:

Debits Cash £20,000 Accounts receivable—net 70,000 Inventories 50,000 Equipment 800,000 Cost of sales 350,000 Depreciation expense 80,000 Operating expenses 100,000 Dividends 30,000

£1,500,000 Credits Accumulated depreciation £330,000 Accounts payable 70,000 Capital stock 400,000 Retained earnings 100,000 Sales 600,000

£1,500,000 REQuIRED 1. Prepare a translation worksheet to convert Soo’s December 31, 2016, adjusted trial balance into U.S.

dollars.

2. Prepare journal entries on Pyl’s books to account for the investment in Soo for 2016.

3. Directly compute the translation gain or loss.