Purl: II Interoompany Transactions Facts: Sub Co is a 90% owned subsidiary of Parent Co, acquired for $94,500 cash on July 1, 201?, when Sub's net assets consisted of $100,000 capital stoclr. and $5,000 retained earnings. The cost of Parent Co's 90% interest in Sun was equal to book value and fair value of the interest acquired. Parent Co sells inventory items to Sub Co on a regular basis, and the intercompany transaction data for 2020 are as Follows: Sales to Sub Co in 2020 [cost $15,000}, selling prioe $20,000 Unrealized prot in Sub Co's inventory at December 31, 2019 [inventory was sold during 2020]: 2,000 Unrealized prot in Sub Co's inventory at December 31, 2020 2,500 Sub Co's accounts payable to Parent Co at December 31, 2020 10,000 At December 31, 2019, Parent Co's investment in subsidiary account had a balance of $120,500. This balance consisted of Parent Co's 90% equity in Sub's $145,000 net assets on that date less $2,000 unrealized prot in Sub's December 31, 2019 inventory. During 2020 Parent Co made the following entries in its recorchar for its investment in Sub: To record income rorn Sub Co For 2029 as foiiows: Equity in Sub Co's net income {$30,900 * 90%,! Add: 2019 inventory prot recognized in 2020' Less: .2020 inventory prot deferred at yearend Total The 2019 intercompany sales that led to the unrealized inventory prots were recognize in 2020 and the full amount of the unrealized inventory prot originating in 2020 is deferred at December 31, 2020. Parent Co's investment in Sub to increased from $129,500 at January 1, 2020 to $145,000 at December 31, 2020, the entire change consisting of $25,500 income less $9,000 dividends for the year. Raqulred: Using the Excel le \"Case 1 - Advanced accounting topir' and the worksheet 'Intercompany," prepare and show the required adjusting and eliminating journal entries {in journal entry form} and complete the worksheet, posting the journal entries to the worksheet and completing the Consolidated column with the totals. Part III Foreign Currency Accounting Facts: Parent Co, a U.S. firm, paid $525,000 cash to acquire all of the stock of the British firm Sub Co when the book value of Sub's net assets was equal to fair value. This business combination occurred on December 31, 2017, when the exchange rate for British pounds was $1.50. During 2018 the British pound weakened against the U.S. dollar, resulting in a year- end current exchange rate of $1.40. Average exchange rates for 2018 were $1.45. Sub Co paid a $30,000 dividend to Parent Co on December 1, 2018 when the exchange rate was $1.42 per British pound. The only intercompany transaction between the firms was an $84,000 (856,000) noninterest-bearing advance by Sub Co to Parent Co that occurred on January 4, 2018 when the exchange rate was still $1.50. The advance is denominated in U.S. dollars. Sub Co's functional currency is British pounds, so the advance to Parent Co is a foreign currency transaction from Sub Co's perspective, but not to Parent Co because it is denominated in U.S. dollars. Sub Co's assets, liabilities and stockholder's equity at acquisition were as follows: British Exchange U.S. Pounds Rate Dollars Assets Cash E140,000 $1.50 $210,000 Accounts receivable 40,000 1.50 60,000 Inventory 120,000 1.50 180,000 Plant assets 100,000 1.50 150,000 Less: Accumulated depreciation -20,000 1.50 -30,000 Total assets E380 000 $570.000 Liabilities & Stockholder's Equity Accounts payable E30,000 $1.50 $45,000 Bonds payable 100,000 1.50 150,000 Common stock 200,000 1.50 300,000 Retained earnings 50,000 1.50 75,000 Total liabilities & stockholder's equity E380 0on $570.000 Sub Co adjusted its advance to Parent Co at year-end 2018 to reflect the $1.40 current exchange rate. Sub Co recorded an exchange gain because there is no evidence that the advance is of a long-term investment nature. The entry recorded on Sub Co's books was: DR CR Advance to parent E4,000 Exchange gain E4,000 To adjust receivable denominated in U.S. dollars (($84,000 / $1.40) - E56,000)Required: In the Excel file "Case 1 - Advanced accounting topics" and the worksheet "Foreign Currency" you will find Sub Co's adjusted trial balance at December 31, 2018 in British pounds. Please prepare the following: Convert Sub Co's accounts to U.S. dollars showing the exchange rate and U.S. dollar amount for each account. Prepare Sub Co's December 31, 2018 financial statements in U.S. dollars: Balance Sheet (in classified format), Income Statement (in multiple-step format) and Statement of Retained Earnings