Question
Ginvold Co. began operating a subsidiary in a foreign country on January 1, 20X1 by acquiring all of the common stock for 50,000 stickles, the
Ginvold Co. began operating a subsidiary in a foreign country on January 1, 20X1 by acquiring all of the common stock for 50,000 stickles, the local currency. This subsidiary immediately borrowed 120,000 on a 5-year note with 10% interest payable annually beginning on January 1, 20X2. A building was then purchased for 170,000 on January 1, 20X1. This property had a 10-year anticipated life and no salvage value and was to be depreciated using the straight-line method. The building was immediately rented for 3 years to a group of local doctors for 6,000 per month. By year-end, payments totaling 60,000 had been received.
On October 1, 5,000 were paid for a repair made on that date and it was the only transaction of this kind for the year. A cash dividend of 6,000 was transferred back to Ginvold at December 31, 20X1.
The functional currency for the subsidiary was the stickle (). Currency exchange rates were as follows:
January 1, 20X1
1 = $2.40
October 1, 20X1
1 = $2.22
December 31, 20X1
1 = $2.16
Average for 20X1
1 = $2.28
(A)Showon anincome statement for this subsidiary in stickles.
(B) Translate these amounts into U.S. dollars
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