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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) 62,000.

On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 62,000. SunTimes December 31, 20X1, trial balance in SFr is as follows:

Debit Credit
Cash SFr 9,000
Accounts Receivable (net) 24,000
Receivable from Popular Creek 6,500
Inventory 29,500
Plant & Equipment 106,000
Accumulated Depreciation SFr 10,900
Accounts Payable 12,500
Bonds Payable 51,000
Common Stock 62,000
Sales 172,700
Cost of Goods Sold 74,500
Depreciation Expense 10,900
Operating Expense 33,500
Dividends Paid 15,200
Total SFr 309,100 SFr 309,100

Additional Information

The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $5,500 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 years 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

The Swiss franc is the functional currency.

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

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