Question
Boston Company organized and began operating a subsidiary in a foreign country on January 1, 2015, by investing LCU 46,000. This subsidiary immediately borrowed LCU
Boston Company organized and began operating a subsidiary in a foreign country on January 1, 2015, by investing LCU 46,000. This subsidiary immediately borrowed LCU 115,000 on a five-year note with 7 percent interest payable annually beginning on January 1, 2016. The subsidiary then purchased for LCU 161,000 a building that had a 10-year anticipated life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, the subsidiary rents the building for three years to a group of local doctors for LCU 4,000 per month. By year-end, payments totaling LCU 40,000 had been received. On October 1, LCU 2,700 was paid for a repair made on that date. The subsidiary transferred a cash dividend of LCU 4,200 back to Boston on December 31, 2015. The functional currency for the subsidiary is the LCU. Currency exchange rates for 1 LCU follow: |
January 1, 2015 | $ | 2.30 | = | 1 LCU |
October 1, 2015 | 2.25 | = | 1 | |
Average for 2015 | 2.10 | = | 1 | |
December 31, 2015 | 1.90 | = | 1 | |
Prepare an income statement, statement of retained earnings, and balance sheet for this subsidiary in LCU and then translate these amounts into U.S. dollars. (Amounts to be deducted should be indicated by a minus sign.) |
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