EXERCISE 13-8

Temporal Method (Remeasurement)

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 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.

The January 1, 2019, retained earnings balance of Lansing 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 2018 and the ending inventory was acquired during the last five months of 2019. Sales were made and purchases and other expenses were incurred evenly during the year.

Balances	Pounds
Sales	2,900,000
COGS	($1,400,000)
Depreciation exp.	($300,000)
Other exp	($400,000)
Net Income	$ 800,000
1/1 RE	$900,000
Balance	$1,700,000
Less Dividends declared and Paid Dec31	($325,000)
12/31 RE	$1,375,000
Balances	Pounds
Cash and AR	$1,275,000
Inventory	$490,000
PP&E	$3,450,000
Total Assets	$5,215,000
Current L	$640,000
LT NP	$1,200,000
Capital Stock	$2,000,000
RE	$1,375,000
Translation Adj.
Total L & RE	$5,215,000

Rates:

January 1, 2006 $1.8996

January 1, 2008 1.8365 Average for the last quarter 2018 1.5300 January 1, 2019 1.4919 December 31, 2019 1.4730 Average for 2019 1.4788 Average for AugustDecember 2019 1.4950

Required:

Translate (remeasure) the account balances of Lansing into dollars assuming that the dollar is the functional currency of Lansing Company. The beginning retained earnings balance of Lansing Company in dollars was $1,791,324.