Question
On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 80,000.
On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 80,000. SunTime's December 31, 20X1, trial balance in SFr is as follows:
Debit Credit
Cash SFr 7,200
Accounts Receivable (net) 23,500
Receivable from Popular Creek 6,000
Inventory 28,000
Plant & Equipment 106,000
Accumulated Depreciation SFr 11,300
Accounts Payable 13,800
Bonds Payable 54,500
Common Stock 80,000
Sales 144,600
Cost of Goods Sold 70,500
Depreciation Expense 11,300
Operating Expense 34,500
Dividends Paid 17,200
Total SFr 304,200 SFr 304,200
Additional Information
- The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $5,000 payable to SunTime.
- Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1.
- 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.
- The dividends were declared and paid on November 1.
- 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. A proof of the translation adjustment.
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