Problem 4

As of December 31, 2020 Big USA Company owns a foreign subsidiary (Taco) based in Mexico. Big is in the process of preparing consolidated financial statements and must translate the trial balance of Taco to U.S. Dollars. Selected financial information of Taco in pesos is presented below.

Pesos

Inventory 12/31/20 300,000

Purchases in 2020 2,600,000

Inventory 12/31/19 420,000

Equipment purchased as follows

1/1/18 250,000

Purchases during 2018 150,000

Purchases during 2019 350,000

Purchases during 2020 620,000

All equipment is depreciated over 8 years on a straight-line basis with a full year taken in year of acquisition.

The inventory turnover rate is 90 days.

Relevant Exchange Rates Pesos per dollar

1/1/18 8.0

Average Rates 2018 8.5

Average Rate 2019 9.3

Average Rate 2020 9.8

Rate 4^thquarter 2019 8.9

Rate 4^thquarter 2020 9.6

Current rate 12/31/18 8.9

Current Rate 12/31/19 9.2

Current Rate 12/31/20 9.9

REQUIRED (In US Dollars)

1. Assuming the U.S. Dollar is functional currency determine following

Cost Goods Sold for 2020

Balance in Equipment 12/31/20

Balance in Accumulated Depreciation 12/31/20

Depreciation Expense 2020

2. Assuming the Peso is functional currency determine following

Cost Goods Sold for 2020

Balance in Equipment 12/31/20

Balance in Accumulated Depreciation 12/31/20

Depreciation Expense 2020