Foreign Currency Accounting

Facts: Parent Co$,$ a U$.$S$.$ firm, paid $$525,000$ cash to acquire all of the stock of the British

firm Sub Co when the book value of Sub's net assets was equal to fair value. This business

combination occurred on December $31,2022,$ when the exchange rate for British pounds was

$$1\mathrm{.}50.$ During $2023$ the British pound weakened against the U$.$S$.$ dollar, resulting in a year$-$

end current exchange rate of $$1\mathrm{.}44.$ Average exchange rates for $2023$ were $$1\mathrm{.}48.$

Sub Co paid a $30,000$ dividend to Parent Co on December $1,2023$ when the exchange rate

was $$1\mathrm{.}46$ per British pound. The only intercompany transaction between the firms was an

$$84,000(56,000)$ noninterest$-$bearing advance by Sub Co to Parent Co that occurred on

January $4,2023$ when the exchange rate was still $$1\mathrm{.}50.$ The advance is denominated in U$.$S$.$

dollars. Sub Co's functional currency is British pounds, so the advance to Parent Co is a

foreign currency transaction from Sub Co's perspective, but not to Parent Co because it is

denominated in U$.$S$.$ dollars.

Sub Co's assets, liabilities and stockholder's equity at acquisition $($i$.$e$.,$ December $31,2022)$

were as follows:

Sub Co adjusted its advance to Parent Co at year$-$end $2023$ to reflect the $$1\mathrm{.}44$ current

exchange rate. Sub Co recorded an exchange gain because there is no evidence that the

advance is of a long$-$term investment nature. The entry recorded on Sub Co's books was:

Required: The following is Sub Co's adjusted trial balance at December $31,2023$ in British

pounds:

Prepare Sub Co's December $31,2023$ financial statements in U$.$S$.$ dollars: Balance Sheet

$($in classified format$),$ Income Statement $($in multiple$-$step format$)$ and Statement of

Retained Earnings $($ignore income tax expense$).$