On January 1, 2014, Trenten Systems, a U.S.-based company, purchased a controlling

interest in Grant Management Consultants located in Zurich, Switzerland. The acquisition

was treated as a purchase transaction. The 2014 financial statements stated in

Swiss francs are given below.

Exercises 509

GRANT MANAGEMENT CONSULTANTS

Comparative Balance Sheets

January 1 and December 31, 2014

Jan. 1 Dec. 31

Cash and Receivables 20,000 55,000

Net Property, Plant, and Equipment 40,000 37,000

Totals 60,000 92,000

Accounts and Notes Payable 30,000 32,000

Common Stock 20,000 20,000

Retained Earnings 10,000 40,000

Totals 60,000 92,000

GRANT MANAGEMENT CONSULTANTS

Consolidated Income and Retained Earnings Statement

for the Year Ended December 31, 2014

Revenues 75,000

Operating Expenses including Depreciation of 3,000 francs 30,000

Net Income 45,000

Dividends Declared and Paid 15,000

Increase in Retained Earnings 30,000

Direct exchange rates for Swiss franc are:

Dollars per Swiss Franc

January 1, 2014 $1.09

December 31, 2014 1.03

Average for 2014 1.06

Dividend declaration and payment date 1.08

Required:

A. Convert (remeasure) the financial statements of the foreign subsidiary using the temporal

method of translation.

B. Prepare a schedule to verify the translation gain or loss.