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EXERCISE 134 Foreign Currency Translation-Current Rate Method 107 On January 1, 2008, Trenten Systems, a U.S-based company, purchased a controlling interest in Grant Management Consultants

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EXERCISE 134 Foreign Currency Translation-Current Rate Method 107 On January 1, 2008, Trenten Systems, a U.S-based company, purchased a controlling interest in Grant Management Consultants located in Zurich, Switzerland. The acquisition was treated as a purchase transaction. The 2008 financial statements stated in Swiss francs are given below. GRANT MANAGEMENT CONSULTANTS Comparative Balance Sheets January 1 and December 31, 2008 Dec. 31 Cash and Receivables Net Property, Plant, and Equipment Totals Jan. 1 20,000 40,000 60,000 55,000 37,000 92,000 Accounts and Notes Payable Common Stock Retained Earnings Totals 30,000 20,000 10,000 60,000 32,000 20,000 40,000 92,000 GRANT MANAGEMENT CONSULTANTS Consolidated Income and Retained Earnings Statement for the Year Ended December 31, 2008 Revenues 75,000 Operating Expenses including Depreciation of 3,000 francs 30,000 Net Income 45,000 Dividends Declared and Paid 15,000 Increase in Retained Earnings 30,000 20 Chapter 13 Translation of Financial Statements of Foreign Affiliates Direct exchange rates for Swiss franc are: Dollars per Franc January 1, 2008 $.5987 December 31, 2008 .5321 Average for 2008 .5654 Dividend declaration and payment date .5810 Required: A. Translate the year-end balance sheet and income statement of the foreign subsidiary us- ing the current rate method of translation. B. Prepare a schedule to verify the translation adjustment

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