On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 74,000. RoadTimes December 31, 20X1, trial balance in SFr is as follows:

Debit

Credit

Cash

SFr

8,800

Accounts Receivable (net)

21,500

Receivable from Popular Creek

6,900

Inventory

26,000

Plant & Equipment

109,000

Accumulated Depreciation

SFr

10,500

Accounts Payable

12,400

Bonds Payable

52,000

Common Stock

74,000

Sales

157,700

Cost of Goods Sold

74,000

Depreciation Expense

10,500

Operating Expense

33,500

Dividends Paid

16,400

Total

SFr

306,600

SFr

306,600

Additional Information
1.	The receivable from Popular Creek is denominated in Swiss francs. Popular Creeks books show a $5,900 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 years 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 1	1	=	0.73
March 1	1	=	0.74
November 1	1	=	0.77
December 31	1	=	0.80
20X1 average	1	=	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 year
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 31

b.

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

	Cash flow statementcheckbox Statement of financial positioncheckbox Income statementcheckbox Statement of comprehensive income Statement of retained earning