QUESTION 2 CURRENCY TRANSLATION Attached are the summarized financial statements of Forex Co. in its local currency,
Question:
QUESTION 2 CURRENCY TRANSLATION
Attached are the summarized financial statements of Forex Co. in its local currency, the florin, at the acquisition date and the start and the end of the 2021 financial year.Forex is an 80% owned subsidiary of Findex, a US reporting entity.Findex acquired Forex on January 1, 2019.
Other information:
On June 30, 2021, Forex acquired new plant for $66,000 by issuing a note payable to the supplier and paying cash.No plant was sold.All the old plant is depreciated over a remaining ten year useful life from January 1, 2019.The new plant is also depreciated over a ten year life with no residual value.
Local sales, local purchases, other local operating expenses and taxation may be assumed to have occurred evenly throughout the accounting period.
Inventory on hand was all acquired from the parent company.There was no inventory acquired locally at either the beginning or the end of the year.Inventory received from the parent company held at December 31, 2020 was purchased on December 1, 2020.Inventory received from the parent company held at December 31, 2021 was purchased on December 1, 2021.
Sales to the parent company are billed in dollars.Per the parent's record the value in dollars of these sales was $850,000.Purchases from the parent company may be assumed to have occurred evenly throughout the accounting period.The receivable from the parent is also designated in US dollars.
Dividends were paid on December 31, 2021.
These remeasured financial statements are being prepared for inclusion in the consolidated financial statements of Findex.
Exchange rates were as follows:
Jan 1, 2019 $2.00 per florin
December 1 2020 2.10
December 31.2020 2.20
Average 2021 and June 30 2.35
December 1 2021 2.38
December 31 2021 2.40
REQUIRED
ASSUMING THE FUNCTIONAL CURRENCY IS THE US DOLLAR
A.In a worksheet, remeasure the December 31, 2020 balance sheet into US dollars.
B.In a worksheet, remeasure the December 31, 2021 financial statements into US dollars.
C.Verify your gain by examining the change on the net monetary assets/liabilities in the year.
Expert Answer:
