Answered step by step
Verified Expert Solution
Question
1 Approved Answer
begin{tabular}{|c|c|} hline begin{tabular}{c} BALANCE SHEET December 31, Year 2 end{tabular} & hline multicolumn{2}{|l|}{ Assets } hline Cash & PLN 1,000,000 hline
\begin{tabular}{|c|c|} \hline \begin{tabular}{c} BALANCE SHEET \\ December 31, Year 2 \end{tabular} & \\ \hline \multicolumn{2}{|l|}{ Assets } \\ \hline Cash & PLN 1,000,000 \\ \hline Accounts receivable ( net) & 1,650,000 \\ \hline Inventory ....... & 4,250,000 \\ \hline Equipment & 12,500,000 \\ \hline Less: Accumulated depreciation ................... & (4,250,000) \\ \hline Building & 36,000,000 \\ \hline Less: Accumulated depreciation & (15,150,000) \\ \hline Land ......... & 3,000,000 \\ \hline Total assets & PLN39,000,000 \\ \hline \multicolumn{2}{|l|}{ Llabllitles and Stockholders' Equity } \\ \hline Accounts payable. & PLN 1,250,000 \\ \hline Long-term debt ............. & 25,000,000 \\ \hline Common stock & 2,500,000 \\ \hline Additional paid-in capital. & 7,500,000 \\ \hline Retained earnings .......... & 2,750,000 \\ \hline Total liabilities and stockholders' equity & PLN 39,000,000 \\ \hline \end{tabular} Additional information: The January 1, Year 2, beginning inventory of PLN 3,000,000 was acquired on December 15, Year 1, when the exchange rate was $0.215. Purchases of inventory during Year 2 were acquired uniformly throughout the year. The December 31, Year 2, ending inventory of PLN 4,250,000 was acquired evenly throughout the fourth quarter of Year 2 when the exchange rate was $0.16. All fixed assets were on the books when the subsidiary was acquired except for PLN 2,500,000 of equipment, which was acquired on January 3, Year 2, when the exchange rate was $0.18, and PLN 6,000,000 in buildings, which were acquired on August 5, Year 2, when the exchange rate was $0.17. Equipment is depreciated on a straight-line basis over 10 years. Buildings are depreciated on a straight-line basis over 40 years. A full year's depreciation is taken in the year of acquisition. - Dividends were declared and paid on December 15, Year 2, when the exchange rate was $0.155. - Other exchange rates for Year 2 are: Required: 1. Translate Swoboda's financial statements into U.S. dollars in accordance with U.S. GAAP at December 31, Year 2, using the following scenarios. a. Assume the Polish zloty is the functional currency. The December 31, Year 1, retained earnings amount that appeared in Swoboda's translated financial statements was $56,250. The December 31 , Year 1 , cumulative translation adjustment that appeared in Swoboda's translated balance sheet was negative $506,250. b. Assume the U.S. dollar is the functional currency. The December 31, Year 1, retained earnings amount that appeared in Swoboda's remeasured financial statements was $882,500. c. Assume the same scenario described in (b) except Swoboda has no long-term debt. Instead, Swoboda has common stock of PLN 10,000,000 and additional paid-in capital of PLN 25,000,000. The December 31, Year 1, retained earnings amount that appeared in Swoboda's remeasured financial statements was negative $367,500. 2. Explain why the sign of the translation adjustments in (1a),(1b), and (1c) is positive or negative. Columbia Corporation Columbia Corporation, a U.S.-based company, acquired a 100 percent interest in Swoboda Company in Lodz, Poland, on January 1, Year 1, when the exchange rate for the Polish zloty (PLN) was $0.25. The financial statements of Swoboda as of December 31, Year 2, two years later, are as follows
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started