Question
On January 1, 2017, a U.S. company purchased 100% of the outstanding stock of Ventana Grains, a company located in Latz City, New Zealand. Ventana
On January 1, 2017, a U.S. company purchased 100% of the outstanding stock of Ventana Grains, a company located in Latz City, New Zealand. Ventana Grains was organized on January 1, 2003. All the property, plant, and equipment held on January 1, 2017, was acquired when the company was organized. The business combination was accounted for as a purchase transaction. The 2017 financial statements for Ventana Grains, prepared in its local currency, the New Zealand dollar, are given here.
VENTANA GRAINS
Comparative Balance Sheets
January 1 and December 31, 2017
Jan. 1
Dec. 31
Cash and Receivables
500,000
880,000
Inventories
600,000
500,000
Land
400,000
400,000
Buildings (net)
650,000
605,000
Equipment (net)
465,000
470,000
Totals Assets
2,615,000
2,855,000
Jan. 1
Dec. 31
Short-Term Accounts and Notes
295,000
210,000
Long-Term Notes (600,000 issued 9/1/2013,
80,000 issued 7/1/2017)
600,000
680,000
Common Stock
800,000
800,000
Additional Paid-in Capital
200,000
200,000
Retained Earnings
720,000
965,000
Total Liabilities and Equity
2,615,000
2,855,000
VENTANA GRAINS
Consolidated Income and Retained Earnings Statement
for the Year Ended December 31, 2017
Revenues
3,225,000
Cost of Goods Sold:
Beginning Inventory
600,000
Purchases
2,100,000
Goods Available for Sale
2,700,000
Less: Ending Inventory
500,000
Cost of Goods Sold
2,200,000
Gross Profit on Sales
1,025,000
Depreciation Expense
140,000
Other Expenses
540,000
680,000
Net Income
345,000
Jan. 1 Retained Earnings
720,000
Total
1,065,000
Less: Dividends Paid
100,000
Dec. 31 Retained Earnings
965,000
The account balances are computed in conformity with U.S. generally accepted accounting standards.
Other information is as follows:
1. Direct exchange rates for the New Zealand dollar on various dates were:
Date
Exchange Rate
1-Jan-2003
$0.8011
1-Sep-2013
0.5813
1-Jan-2017
0.7924
1-Jul-2017
0.7412
31-Dec-2017
0.7298
Average for 2017
0.7480
Average for the last four months of 2017
0.7476
2. Ventana Grains purchased additional equipment for 100,000 New Zealand dollars on July 1, 2017, by issuing a note for 80,000 New Zealand dollars and paying the balance in cash.
3. Sales were made and purchases and "Other Expenses" were incurred evenly throughout the year.
4. Depreciation for the period in New Zealand dollars was computed as follows:
Building
45,000
Equipment - Purchased before 1/1/2017
85,000
Equipment - Purchased July 1, 2017
10,000
5. The inventory, purchased evenly throughout the year, is valued on a FIFO basis. The beginning inventory was acquired when the exchange rate was $.6780. The ending inventory was acquired during the last four months of 2017.
6. Dividends of 50,000 New Zealand dollars were declared and paid on July 1 and December 31.
Instructions: Translate the financial statements into dollars assuming that the U.S. dollar is the functional currency.
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