On January 2, 2014, P Company, a U.S.-based company, acquired for 2,000,000 francs an 80% interest in SFr Company, a Swiss company. On January 2, 2014, SFr Company reported a retained earnings balance of 480,000 francs. SFrs books are maintained in francs and are in conformity with U.S. generally accepted accounting principles. Trial balances of the two companies as of December 31, 2015, are presented here: P Company SFr Company Debits (Dollars) (Francs) Cash 500,200 962,500 Accounts Receivable 516,400 660,000 Inventories (FIFO cost) 627,800 1,037,500 Investment in SFr Company 300,000 Land 450,000 500,000 Buildings (net) 610,000 550,000 Equipment (net) 290,000 405,000 Dividends Declared 200,000 375,000 Cost of Goods Sold 2,720,000 2,312,500 Depreciation Expense 210,000 125,000 Other Expense 914,000 818,750 Income Tax Expense 100,000 102,500 Totals 7,438,400 7,848,750 P Company SFr Company Credits (Dollars) (Francs) Accounts Payable 540,000 800,000 Short-term Notes Payable 300,000 650,750 Bonds Payable 700,000 850,000 Common Stock 800,000 960,000 Additional Paid-in Capital 300,000 300,000 Retained Earnings, 1/1 544,400 513,000 Sales 4,200,000 3,775,000 Dividend Income 54,000 Totals 7,438,400 7,848,750 Other information related to the subsidiary follows: 1. Beginning inventory of 830,000 francs was acquired when the exchange rate was $.165. 2. Purchases made uniformly throughout 2015 were 2,520,000 francs. 3. The franc is identified as the subsidiarys functional currency. 4. The subsidiarys beginning (1/1/15) retained earnings and cumulative translation adjustment (credit) in dollars were $75,948 and $36,462, respectively. 5. All plant assets were acquired before the parent obtained a controlling interest in the subsidiary. 6. Sales are made and all expenses are incurred uniformly throughout the year. 7. The ending inventory was acquired during the last quarter. 8. The subsidiary declared and paid dividends of 375,000 francs on September 2. 9. The following direct exchange rate quotations were available: Date of subsidiary acquisition $.15 Average for 2014 .156 January 1, 2015 .17 September 2, 2015 .18 December 31, 2015 .19 Average for the 4th quarter, 2015 .185 Average for 2015 .176 Required: A. Prepare a translated balance sheet and combined statement of income and retained earnings for the subsidiary. B. Prepare a schedule to verify the translation adjustment.

RemeasurementU.S. Dollar Is the Functional Currency Use the information provided in Problem 13-3 for P Company and SFr Company. Required: A. Convert the accounts of the foreign subsidiary, assuming that the U.S. dollar is the functional currency of both companies. For this problem assume that the subsidiarys beginning (1/1/15) retained earnings balance in the translated balance sheet is $76,660. B. Prepare a schedule to verify the translation gain or loss, assuming a 637,000 franc net exposed liability position at the beginning of the year.