Preston Company is a U.S. corporation that maintains a 100% investment in Seida, Inc., a non-US company.

Seidas financial statements are on the page following this page.

At 12/31/20x1, Preston Company will prepare consolidated financial statements that include Seida, Inc.

Therefore, they will have to convert Seidas financials from the local currency amounts to U.S. dollar amounts. Below are the relevant exchange rates and some additional information:

Relevant Exchange Rates and additional information

Exchange rate for when common stock issued $ 2.08

Exchange rate for when property, plant and equipment acquired $ 1.98

Retained earnings translated as of Jan. 1, 20x1 $ 396,520

Inventory acquired evenly throughout the year

Dividends were declared on Apr. 1, 20x1

Relevant currency exchange rates:

January 1, 20x1 $ 1.67

April 1, 20x1 $ 1.59

September 1, 20x1 $ 1.63

December 31, 20x1 $ 1.60

Weighted average rate for 20x1 $ 1.62

Additional information:

The gain on sale was associated with a 9/1/20x1 transaction.

The 12/31/20x0 financial statements reported an adjustment to convert the subsidiarys financial statements for consolidation was $85,000.

Required

A. Assuming the LCU is Seidas functional currency, prepare a schedule in which you apply the appropriate rate to convert Seidas financials into the U.S. dollar amounts. (Note: Please use an Excel schedule for this item)

B. Suppose

: a. Seidas local currency is the South African rand and

b. Seidas functional currency is the Canadian dollar.

Briefly explain the steps (and applicable method used, i.e., current rate or temporal method) required in converting from (1) Seidas local currency, the rand, to the Canadian dollar, and (2) from the Canadian dollar to Prestons reporting currency, the U.S. dollar. Your explanation should address the accounting for the translation or remeasurement adjustment, as applicable.

Following are the 12/31/20x1 account balances for Seida, Inc. in its currency, the LCU:

Seida, Inc. (all amounts in LCUs)

Income Statement

Fiscal year ending 12/31/20x1

in LCUs

Sales 270,000

Cost of goods sold (155,000)

Gross profit 115,000

Less: Operating expenses (49,000)

Gain on sale of equipment (9/1/20x1) 5,000

Net income 71,000

Statement of Retained Earnings

Fiscal year ending 12/31/20x1

in LCUs

Retained earnings, 1/1/20x1 216,000

Net income 71,000

Less: Dividends (26,000)

Retained earnings, 12/31/20x1 261,000

Balance Sheet

at 12/31/20x1

in LCUs

Cash 50,000

Receivables 116,000

Inventory 58,000

Property, plant and equipment (net) 339,000

Total assets 563,000

Liabilities 182,000

Common stock 120,000

Retained earnings, 12/31/20x1 261,000

Total liabilities and equities 563,000