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) 70,000.
On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 70,000. SunTimes December 31, 20X1, trial balance in SFr is as follows: Debit Credit Cash SFr 7,500 Accounts Receivable (net) 23,000 Receivable from Popular Creek 5,400 Inventory 29,500 Plant & Equipment 107,000 Accumulated Depreciation SFr 10,900 Accounts Payable 12,300 Bonds Payable 53,000 Common Stock 70,000 Sales 158,500 Cost of Goods Sold 73,500 Depreciation Expense 10,900 Operating Expense 32,500 Dividends Paid 15,400 Total SFr 304,700 SFr 304,700 Additional Information The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $4,400 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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