Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Charles Edward Company established a subsidiary in a foreign country on January 1, 2015, by investing FC 3,200,000 when the exchange rate was $0.50/FC. Charles

Charles Edward Company established a subsidiary in a foreign country on January 1, 2015, by investing FC 3,200,000 when the exchange rate was $0.50/FC. Charles Edward negotiated a bank loan of FC 3,000,000 on January 5, 2015, and purchased plant and equipment in the amount of FC 6,000,000 on January 8, 2015. It depreciated plant and equipment on a straight-line basis over a 10-year useful life. It purchased its beginning inventory of FC 1,000,000 on January 10, 2015, and acquired additional inventory of FC 4,000,000 at three points in time during the year at an average exchange rate of $0.43/FC. It uses the first-in, first-out (FIFO) method to determine cost of goods sold. Additional exchange rates per FC 1 during the year 2015 follow:

OPEN THE ATTACHMENT, the case is in the description.

image text in transcribed EXCEL CASETRANSLATING FOREIGN CURRENCY FINANCIAL STATEMENTS Charles Edward Company established a subsidiary in a foreign country on January 1, 2015, by investing FC 3,200,000 when the exchange rate was $0.50/FC. Charles Edward negotiated a bank loan of FC 3,000,000 on January 5, 2015, and purchased plant and equipment in the amount of FC 6,000,000 on January 8, 2015. It depreciated plant and equipment on a straightline basis over a 10year useful life. It purchased its beginning inventory of FC 1,000,000 on January 10, 2015, and acquired additional inventory of FC 4,000,000 at three points in time during the year at an average exchange rate of $0.43/FC. It uses the firstin, firstout (FIFO) method to determine cost of goods sold. Additional exchange rates per FC 1 during the year 2015 follow: The foreign subsidiary's income statement for 2015 and balance sheet at December 31, 2015, follow: Page 426 As the controller for Charles Edward Company, you have evaluated the characteristics of the foreign subsidiary to determine that the FC is the subsidiary's functional currency. Required a. Use an electronic spreadsheet to translate the foreign subsidiary's FC financial statements into U.S. dollars at December 31, 2015, in accordance with U.S. GAAP. Insert a row in the spreadsheet after retained earnings and before total liabilities and stockholders' equity for the cumulative translation adjustment. Calculate the translation adjustment separately to verify the amount obtained as a balancing figure in the translation worksheet. b. Use an electronic spreadsheet to remeasure the foreign subsidiary's FC financial statements in U.S. dollars at December 31, 2015, assuming that the U.S. dollar is the subsidiary's functional currency. Insert a row in the spreadsheet after depreciation expense and before income before taxes for the remeasurement gain (loss). c. Prepare a report for James Edward, CEO of Charles Edward, summarizing the differences that will be reported in the company's 2015 consolidated financial statements because the FC, rather than the U.S. dollar, is the foreign subsidiary's functional currency. In your report, discuss the relationship between the current ratio, the debt-toequity ratio, and profit margin calculated from the FC financial statements and from the translated U.S. dollar financial statements. Also discuss the meaning of the translated U.S. dollar amounts for inventory and for fixed assets

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Accounting Chapters 1- 15

Authors: James A Heintz, Robert W Parry

23rd Edition

1337794767, 9781337794763

More Books

Students also viewed these Accounting questions

Question

Relax your shoulders

Answered: 1 week ago

Question

Keep your head straight on your shoulders

Answered: 1 week ago