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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

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 euros as of
December 31, 20X7, is as follows:
Debit Credit
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
Accumulated Depreciation 1,417,000
Cost of Goods Sold 17,697,000
Selling, General, and
Administrative 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 1,470,000
Total 40,159,000 40,159,000
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 following items are measured in pound at the December 31, 20x7.
Euros Pounds
Accumulated depreciation
Depreciable Assets 8,730,000 2,671,380
Cost of Goods Sold 17,697,000 5,262,294
Selling, General, Admin. Expense 4,762,000 1,415,886
Accumulated Depreciation 1,417,000 773,915
Sales Revenue 26,430,000 7,866,030
On November 1, 20X6, Kerry received a customer prepayment valued at 3,000,000 euros. On February 1, 3000000
20X7, 2,040,000 euros of the prepayment was earned. The balance remains unearned as of December 31, 2040000
20X7. 960000
Relevant exchange rates are as follows:
Pounds/Euro $/Pound
June 1, 20X4 0.31 $1.60
March 1, 20X6 0.3 $1.64
November 1, 20X6 0.305 $1.65
December 31, 20X6 0.31 $1.68
February 1, 20X7 0.302 $1.67
March 1, 20X7 0.3 $1.66
December 1, 20X7 0.29 $1.64
December 31, 20X7 0.288 $1.64
20X7 average 0.297 $1.66
Required:
Prepare a remeasured and translated trial balance of the Kerry Manufacturing
Company as of December 31, 20X7.
ANS:
Kerry Manufacturing Company
Trial Balance Translation
December 31, 20X7
Relevant Relevant
Exchange Exchange
Balance in Rate Balance in Rate Balance in
Account Euros (Pds/Euros) Pounds ($/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

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