Chapter $12$ Class Illustration

Pepper Corporation purchased $90\%$ of the common stock of Salt Company on January $1,2013.$ The cost

of the investment was equal to the book value interest acquired. Salt Company operates two retail

stores and an exporting business in London that specializes in buying and selling British clothes. Salt

Company was incorporated on January $1,2011,$ at which time all the property, plant, and equipment

was purchased. The long$-$term notes were issued to partially finance the purchase of the fixed assets.

Direct exchange rates for the British pound are as follows:

Dividends were declared and paid on December $31,2021.$ The January $1,2021,$ retained earnings

balance of Salt in dollars was $$1,593,408,$ and the cumulative translation adjustment was a debit balance

of $$939,898.$ The beginning inventory of $420,000$ was acquired during the last quarter of $2020$ and the

ending inventory was acquired during the last five months of $2021.$ Sales were made and purchases and

other expenses were incurred evenly during the year.

Required:

a$.$ On GauchoSpace you will find an Excel file labeled, "Current Rate and Temporal Method

Worksheet. Using this worksheet provided, translate the December $31,2021,$ account balances

of Salt Company into dollars assuming that the pound is the functional currency of Salt

Company.

b$.$ Using the same worksheet as requirement $"$a$."$ above, remeasure the December $31,2021,$

account balances of Salt Company into dollars assuming that the US dollar is the functional

currency of Salt Company. The beginning retained earnings balance of Salt Company in dollars

was $$1,791,324.$