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Parent Corporation acquired foreign sub at book value on January 1, 2018. The purchase price was 2,000,000 Euros at a time when the exchange rate

Parent Corporation acquired foreign sub at book value on January 1, 2018. The purchase price was 2,000,000 Euros at a time when the exchange rate was 1 Euro was equal to $1.12. The trial balance of Foreign sub as of December 31, 2018 is detailed below and relevant exchange rates are as follows. Euros is considered the functional currency.

Historical Rate 1/1/18 1.18

Current Rate 12/31/18 1.25

Average Rate 2018 1.195

Dividend Rate 1.23

Beginning Inventory 1/1/18 1.18

Ending Inventory 1.22

Trial Balance Foreign Subsidiary

Debits

Cash 150,000

Accounts Receivable 180,000

Inventory 230,000

Land 250,000

Buildings 600,000

Equipment 800,000

Cost of Sales 200,000

Depreciation 100,000

Other Expenses 120,000

Dividends 100,000

Total 2.730,000

Credits

Accumulated depreciation 700,000

Accounts Payable 100,000

Short-Term Loan 230,000

Capital Stock 800,000

Retained Earnings, Jan 1 200,000

Sales 700,000

Total 2,730,000

REQUIRED

  1. Convert the foreign currency balance sheet to US Dollars
  2. What is the foreign currency gain or loss and where does it

Appear on the financial statements.

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