Exercise 13-7

Dorsey Corporation purchased 90% of the common stock of Lansing Company on January 1, 2008. The cost of the investment was equal to the book value interest acquired. Lansing Company operates two retail stores and an exporting business in London that specializes in buying and selling British tweeds. The subsidiary provided the following financial statements in pounds to the parent company:

LANSING COMPANY Consolidated Income and Retained Earnings Statement for the Year Ended December 31, 2014
Sales		3,060,000
Cost of Goods Sold		(1,330,000	)
Depreciation Expense		(305,000	)
Other Expenses		(430,000	)
Net Income		995,000
1/1 Retained Earnings		957,000
		1,952,000
Less: Dividends Declared and Paid, December 31		(333,000	)
12/31 Retained Earnings		1,619,000

LANSING COMPANY Balance Sheet December 31, 2014
Cash and Receivables		1,250,000
Inventory		499,000
Property, Plant, and Equipment		3,440,000
Total		5,189,000
Current Liabilities		240,000
Long-Term Notes Payable		1,160,000
Common Stock		2,170,000
Retained Earnings		1,619,000
Total		5,189,000

Lansing Company was incorporated on January 1, 2006, 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:

January 1, 2006		$1.8996
January 1, 2008		1.8365
Average for the last quarter 2013		1.5300
January 1, 2014		1.4919
December 31, 2014		1.4730
Average for 2014		1.4788
Average for AugustDecember 2014		1.4950

The January 1, 2014, retained earnings balance of Lansing in dollars was $1,694,324, and the cumulative translation adjustment was a debit balance of $947,497. The beginning inventory of 425,000 was acquired during the last quarter of 2013 and the ending inventory was acquired during the last five months of 2014. Sales were made and purchases and other expenses were incurred evenly during the year. Translate the December 31, 2014, account balances of Lansing Company into dollars assuming that the pound is the functional currency of Lansing Company. (Round answers to 0 decimal places, e.g. 5,125. Enter loss and debit cumulative translation adjustment using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).)

		Adjusted Trial Balance ()		Translation Rate		Adjusted Trial Balance ($)
Consolidated Income and Retained Earnings Statement
Cost of Goods SoldDepreciation ExpensesDividendsNet Income / (Loss)Net Income to Retained EarningsOther ExpensesRetained Earnings - 1/1Retained Earnings - 12/31SalesTotal Cost & ExpensesTotal Revenues				$
Cost of Goods SoldDepreciation ExpensesDividendsNet Income / (Loss)Net Income to Retained EarningsOther ExpensesRetained Earnings - 1/1Retained Earnings - 12/31SalesTotal Cost & ExpensesTotal Revenues
Cost of Goods SoldDepreciation ExpensesDividendsNet Income / (Loss)Net Income to Retained EarningsOther ExpensesRetained Earnings - 1/1Retained Earnings - 12/31SalesTotal Cost & ExpensesTotal Revenues
Cost of Goods SoldDepreciation ExpensesDividendsNet Income / (Loss)Net Income to Retained EarningsOther ExpensesRetained Earnings - 1/1Retained Earnings - 12/31SalesTotal Cost & ExpensesTotal Revenues
Cost of Goods SoldDepreciation ExpensesDividendsNet Income / (Loss)Net Income to Retained EarningsOther ExpensesRetained Earnings - 1/1Retained Earnings - 12/31SalesTotal Cost & ExpensesTotal Revenues
Cost of Goods SoldDepreciation ExpensesDividendsNet Income / (Loss)Net Income to Retained EarningsOther ExpensesRetained Earnings - 1/1Retained Earnings - 12/31SalesTotal Cost & ExpensesTotal Revenues
AddLess : Cost of Goods SoldDepreciation ExpensesDividendsNet Income / (Loss)Net Income to Retained EarningsOther ExpensesRetained Earnings - 1/1Retained Earnings - 12/31SalesTotal Cost & ExpensesTotal Revenues
Cost of Goods SoldDepreciation ExpensesDividendsNet Income / (Loss)Net Income to Retained EarningsOther ExpensesRetained Earnings - 1/1Retained Earnings - 12/31SalesTotal Cost & ExpensesTotal Revenues
Balance Sheet
Total

Exercise 13-7 Dorsey Corporation purchased 90% of the common stock of Lansing Company on January 1, 2008. The cost of the investment was equal to the book value interest acquired. Lansing Company operates two retail stores and an exporting business in London that specializes in buying and selling British tweeds. The subsidiary provided the following financial statements in pounds to the parent company: LANSING COMPANY Consolidated Income and Retained Earnings Statement for the Year Ended December 31, 2014 Sales 3,060,000 Cost of Goods Sold (1,330,000) Depreciation Expense (305,000) Other Expenses (430,000) Net Income 995,000 1/1 Retained Earnings 957,000 1,952,000 Less: Dividends Declared and Paid, December 31 (333,000) 12/31 Retained Earnings 1,619,000 LANSING COMPANY Balance Sheet December 31, 2014 Cash and Receivables 1,250,000 Inventory 499,000 Property, plant, and Equipment 3,440,000 Total 5,189,000 Current Liabilities 240,000 Long-Term Notes Payable 1,160,000 Common Stock 2,170,000 Retained Earnings 1,619,000 Total 5,189,000 Lansing Company was incorporated on January 1, 2005, 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: January 1, 2006 January 1, 2008 Average for the last quarter 2013 January 1, 2014 December 31, 2014 Average for 2014 Average for August-December 2014 $1.8996 1.8365 1.5300 1.4919 1.4730 1.4788 1.4950 The January 1, 2014, retained earnings balance of Lansing in dollars was $1,694,324, and the cumulative translation adjustment was a debit balance of $947,497. The beginning inventory of 425,000 was acquired during the last quarter of 2013 and the ending inventory was acquired during the last five months of 2014. Sales were made and purchases and other expenses were incurred evenly during the year. Translate the December 31, 2014, account balances of Lansing Company into dollars assuming that the pound is the functional currency of Lansing Company. (Round answers to 0 decimal places, e.g. 5,125. Enter loss and debit cumulative translation adjustment using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).) Adjusted Trial Balance (E) Translation Rate Adjusted Trial Balance (S) Consolidated Income and Retained Earnings Statement The January 1, 2014, retained earnings balance of Lansing in dollars was $1,694,324, and the cumulative translation adjustment was a debit balance of $947,497. The beginning inventory of 425,000 was acquired during the last quarter of 2013 and the ending inventory was acquired during the last five months of 2014. Sales were made and purchases and other expenses were incurred evenly during the year. Translate the December 31, 2014, account balances of Lansing Company into dollars assuming that the pound is the functional currency of Lansing Company. (Round answers to 0 decimal places, e.g. 5,125. Enter loss and debit cumulative translation adjustment using either a negative sign preceding the number e.g. -2,945 parentheses e.g. (2,945).) Adjusted Translation Adjusted Trial Balance (E) Rate Trial Balance ($) Consolidated Income and Retained Earnings Statement Balance Sheet Total