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On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 75,000.

On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 75,000. SunTimes December 31, 20X1, trial balance in SFr is as follows:

Debit Credit
Cash SFr 8,800
Accounts Receivable (net) 23,500
Receivable from Popular Creek 5,300
Inventory 25,500
Plant & Equipment 110,000
Accumulated Depreciation SFr 11,700
Accounts Payable 13,800
Bonds Payable 51,000
Common Stock 75,000
Sales 153,600
Cost of Goods Sold 71,000
Depreciation Expense 11,700
Operating Expense 33,500
Dividends Paid 15,800
Total SFr 305,100 SFr 305,100

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:
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
  1. The Swiss franc is the functional currency.

Required: a. Prepare a proof of the translation adjustment.

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

image text in transcribed

> Answer is not complete. POPULAR CREEK CORPORATION AND SUBSIDIARY Proof of Translation Adjustment Year Ended December 31, 20X1 US Dollars 12,166 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 (12,166) 12,166 S 12,166 b. Where is the translation adjustment reported on Popular Creek's consolidated financial statements and its foreign subsidiary? (Select all that apply.) Answer is complete and correct. Cash flow statement Statement of financial position Income statement Statement of comprehensive income O Statement of retained earnings

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