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On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 76,000.

On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 76,000. RoadTime’s December 31, 20X1, trial balance in SFr is as follows:


     
 Debit Credit 
  CashSFr8,800    
  Accounts Receivable (net) 24,500    
  Receivable from Popular Creek 6,500    
  Inventory 27,000    
  Plant & Equipment 103,000    
  Accumulated Depreciation  SFr11,700  
  Accounts Payable   12,300  
  Bonds Payable   53,000  
  Common Stock   76,000  
  Sales   149,600  
  Cost of Goods Sold 71,000    
  Depreciation Expense 11,700    
  Operating Expense 34,500    
  Dividends Paid 15,600    
      
     
  TotalSFr302,600  SFr

302,600  

 

Additional Information

1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek’s books show a $5,500 payable to RoadTime.

2. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1.

3. Equipment is depreciated by the straight-line method with a 10-year life and no residual value. A full year’s depreciation is taken in the year of acquisition. The equipment was acquired on March 1.

4. The dividends were declared and paid on November 1.

5. Exchange rates were as follows:


  SFr $
  January 11=0.73  
  March 11=0.74  
  November 11=0.77  
  December 311=0.80  
  20X1 average1=0.75  


6. The Swiss franc is the functional currency.


Required:

a. Prepare a proof of the translation adjustment.


POPULAR CREEK CORPORATION AND SUBSIDIARY 
Proof of Translation Adjustment 
Year Ended December 31, 20X1 
 U.S Dollars
Net assets at beginning of year 
Adjustment for changes in net asset position during year: 
Net income for year 
Dividends paid 
Net assets translated at: 
Rates during year0
Rates at end of year 
Change in other comprehensive income translation adjustment during year net increase 
Accumulated other comprehensive income translation adjustment January 1 
Change in other comprehensive income translation adjustment December 310

 

b. Where is the translation adjustment reported on Popular Creek’s consolidated financial statements and its foreign subsidiary? (Select all that apply.)

*Cash flow statement

*statement of financial position

*income statement 

*statement of comprehensive income

*statement of retained earnings

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