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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) 68,000.
On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 68,000. SunTime's December 31, 20X1, trial balance in SFr is as follows: Credit Debit SFr 8,800 23,000 5,200 27,500 108,000 Cash Accounts Receivable (net) Receivable from Popular Creek Inventory Plant & Equipment Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Sales Cost of Goods Sold Depreciation Expense Operating Expense Dividends Paid Total SFr 11,800 12,400 52,000 68,000 164,600 74,500 11,800 34,000 16,000 SFr 308,800 SFr 308,800 Additional Information 1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $4,200 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 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: January 1 March November 1 December 31 20X1 average SFr $ 1 = 0.73 1 1 = 0.74 1 1 = 0.77 1 = 0.80 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 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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