Kerry Manufacturing Company is a German subsidiary of a U.S. company. Kerry records its operations and prepares financial statements in euros. However, its functional currency is the British pound. Kerry was organized and acquired by the U.S. company on June 1, 20X4. The cumulative translation adjustment as of December 31, 20X6, was $79,860. The value of the subsidiary's retained earnings expressed in British pounds and U.S. dollars as of December 31, 20X7, was 365,000 pounds and $618,000, respectively. On March 1, 20X7, Kerry declared a dividend of 120,000 euros. The trial balance of Kerry in marks as of December 31, 20X7, is as follows:

DebitCreditCash........................................240,000 Accounts Receivable.........................2,760,000 Inventory (at cost).........................3,720,000 Marketable Securities (at cost).............2,040,000 Prepaid Insurance...........................210,000 Depreciable Assets..........................8,730,000 Accumulated Depreciation....................1,417,000 Cost of Goods Sold.......................... 17,697,000 Selling, General, andAdministrative Expense...................4,762,000 Sales Revenue...............................26,430,000 Investment Income...........................180,000 Accounts Payable............................2,120,000 Unearned Sales Revenue......................960,000 Loans and Mortgage Payable..................5,872,000 Common Stock................................1,500,000 Paid-in Capital in Excess of Par............210,000 Retained Earnings...........................1,470,000Total..................................... 40,159,00040,159,000====================

The marketable securities were acquired on November 1, 20X6, and the prepaid insurance was acquired on December 1, 20X7. The cost of goods sold and the ending inventory are calculated by the weighted-average method. The underlying costs have been incurred uniformly throughout the year. On June 1, 20X4, 60% of the depreciable assets existed, and the balance was acquired on March 1, 20X6. The depreciable assets are amortized over a 10-year period by the straight-line method. Of the total depreciation expense, 80% is traceable to the cost of goods sold and the balance is in general expenses. On November 1, 20X6, Kerry received a customer prepayment valued at 3,000,000 euros. On February 1, 20X7, 2,040,000 euros of the prepayment was earned. The balance remains unearned as of December 31, 20X7.

Relevant exchange rates are as follows:Pounds/Euro$/Pound June 1, 20X4................................0.310$1.600 March 1, 20X6...............................0.300$1.640 November 1, 20X6............................0.305$1.650 December 31, 20X6...........................0.310$1.680 February 1, 20X7............................0.302$1.670 March 1, 20X7...............................0.300$1.660 December 1, 20X7............................0.290$1.640 December 31, 20X7...........................0.288$1.640 20X7 average................................0.297$1.660

Chapter 11

11-29

Required:

Trail balance transualtion neeneeded for remeasured and translated trial balance of the Kerry Manufacturing Company as of December 31, 20X7. Provide supporting schedules.

I NEED A TRIAL BALANCE

Kerry Manufacturing Company Trial Balance Translation December 31, 20X7 Relevant Relevant Exchange Exchange Balance in Rate Balance in Rate Balance in Account Euros (Pds/Euros) Pounds ($/Pds) Dollars Cash 240,000 Accounts Receivable (net) 2,760,000 Inventory (at cost) 3,720,000 Marketable Securities (at cost) 2,040,000 Prepaid Insurance 210,000 Depreciable Assets 8,730,000 Cost of Goods Sold 17,697,000 Selling, General, Admin. Expense 4,762,000 Exchange Loss Total Debits 40,159,000 12,183,001 20,117,316 Accumulated Depreciation 1,417,000 Sales Revenue 26,430,000 Investment Income 180,000 Accounts Payable 2,120,000 Unearned Sales Revenue 960,000 Loans and Mortgage Payable 5,872,000 Common Stock 1,500,000 Paid-in Capital in Excess of Par 210,000 Retained Earnings 1,470,000 Cumulative Translation Adjustment 0 -19,392 Total Credits 40,159,000 12,183,001 20,117,316