Q.2
Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 96,000 pounds. The subsidiary immediately borrowed 230,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 326,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,900 pounds per month. By year-end, rent payments totaling 89,000 pounds had been received, and 17,800 pounds was in accounts receivable. On October 1, 2020, 4,200 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,550 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound follow: January 1, 2020 October 1, 2020 December 31, 2020 Average for 2020 $2.70 - 2.75 - 2.78 - 2.74 1 Pound 1 1 1 Prepare an income statement, statement of retained earnings, and balance sheet for this subsidiary in pounds and then translate these amounts into U.S. dollars. Complete this question by entering your answers in the tabs below. Income Retained Statement Earnings Balance Sheet Prepare a Income Statement. (Amounts to be deducted should be indicated by a minus sign.) SULLIVANS ISLAND COMPANY Income Statement For the Year Ended December 31, 2020 Pounds U.S. Dollars Rent revenue 98.400 $ 209.610 Interest expense Depreciation expense Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 96,000 pounds. The subsidiary immediately borrowed 230,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 326,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,900 pounds per month. By year-end, rent payments totaling 89,000 pounds had been received, and 17,800 pounds was in accounts receivable. On October 1, 2020, 4,200 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,550 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound follow. January 1, 2020 October 1, 2020 December 31, 2020 Average for 2020 $ 2.70 - 2.75 - 2.78 - 2.74 - 1 Pound 1 1 1 es Prepare an income statement, statement of retained earnings, and balance sheet for this subsidiary in pounds and then translate these amounts into U.S. dollars. Complete this question by entering your answers in the tabs below. Income Statement Retained Earnings Balance Sheet Prepare a Statement of Retained earnings. (Amounts to be deducted should be indicated by a minus sign.) SULLIVAN'S ISLAND COMPANY Statement of Retained Earnings For the Year Ended December 31, 2020 Pounds U.S. Dollars Retained earnings, 1/1 Complete this question by entering your answers in the tabs below. Income Retained Statement Balance Sheet Earnings Prepare a Balance Sheet. (Amounts to be deducted should be indicated by a minus sign.) SULLIVAN'S ISLAND COMPANY Balance Sheet December 31, 2020 Pounds U.S. Dollars Assets 5 0 $ Total assets Liabilities and Equities: 0 Total liabilities and equities 0 $ 0
