On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 70,000. SunTimes December 31, 20X1, trial balance in SFr is as follows:

	Debit	Credit
Cash	SFr 8,500
Accounts Receivable (net)	22,500
Receivable from Popular Creek	5,300
Inventory	26,000
Plant and Equipment	104,000
Accumulated Depreciation		SFr 11,300
Accounts Payable		12,100
Bonds Payable		54,500
Common Stock		70,000
Sales		151,800
Cost of Goods Sold	70,500
Depreciation Expense	11,300
Operating Expense	35,000
Dividends Paid	16,600
Total	SFr 299,700	SFr 299,700

Additional Information

1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $4,300 payable to SunTime.
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:

January 1	SFr 1 = $ 0.73
March 1	SFr 1 = $ 0.74
November 1	SFr 1 = $ 0.77
December 31	SFr 1 = $ 0.80
20X1 average	SFr 1 = $ 0.75

1. The Swiss franc is the functional currency.

Required:

1. Prepare a proof of the translation adjustment.
2. Where is the translation adjustment reported on Popular Creeks consolidated financial statements and its foreign subsidiary?

8.75points

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Item3

On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 70,000. SunTimes December 31, 20X1, trial balance in SFr is as follows:

	Debit	Credit
Cash	SFr 8,500
Accounts Receivable (net)	22,500
Receivable from Popular Creek	5,300
Inventory	26,000
Plant and Equipment	104,000
Accumulated Depreciation		SFr 11,300
Accounts Payable		12,100
Bonds Payable		54,500
Common Stock		70,000
Sales		151,800
Cost of Goods Sold	70,500
Depreciation Expense	11,300
Operating Expense	35,000
Dividends Paid	16,600
Total	SFr 299,700	SFr 299,700

Additional Information

1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $4,300 payable to SunTime.
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:

January 1	SFr 1 = $ 0.73
March 1	SFr 1 = $ 0.74
November 1	SFr 1 = $ 0.77
December 31	SFr 1 = $ 0.80
20X1 average	SFr 1 = $ 0.75

1. The Swiss franc is the functional currency.

Required:

1. Prepare a proof of the translation adjustment.
2. Where is the translation adjustment reported on Popular Creeks consolidated financial statements and its foreign subsidiary?