Question
Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 73,000 pounds. The
Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 73,000 pounds. The subsidiary immediately borrowed 146,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 219,000 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 8,100 pounds per month. By year-end, rent payments totaling 81,000 pounds had been received, and 16,200 pounds was in accounts receivable. On October 1, 2020, 3,000 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,200 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 | $ | 3.90 | = | 1 Pound |
October 1, 2020 | 3.95 | = | 1 | |
December 31, 2020 | 3.98 | = | 1 | |
Average for 2020 | 3.94 | = | 1 | |
Prepare a statement of cash flows in pounds for Sullivan's Island Company's foreign subsidiary, and then translate this statement into U.S. dollars. (Round your exchange rate answers to 2 decimal places. Amounts to be deducted and cash outflows should be indicated with minus sign.)
\begin{tabular}{|c|c|c|c|} \hline \multicolumn{4}{|c|}{ SULLIVAN'S ISLAND COMPANY } \\ \hline \multicolumn{4}{|c|}{ Statement of Cash Flows } \\ \hline & Pounds & Exchange Rate & U.S. Dollars \\ \hline \multicolumn{4}{|l|}{ Operating Activities: } \\ \hline \multicolumn{4}{|c|}{} \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline \multicolumn{4}{|c|}{ Cash flow from operating activities } \\ \hline \multicolumn{4}{|l|}{ Investing Activities: } \\ \hline & & & \\ \hline & & & \\ \hline \multicolumn{4}{|c|}{ Cash flow from investing activities } \\ \hline \multicolumn{4}{|l|}{ Financing Activities: } \\ \hline \\ \hline \\ \hline \\ \hline \multirow{2}{*}{\multicolumn{4}{|c|}{ Cash flow from financing activities }} \\ \hline & & & \\ \hline & & & \\ \hline \multicolumn{4}{|c|}{ Effect of exchange rate change on cash } \\ \hline \multicolumn{4}{|l|}{ Beginning balance in cash } \\ \hline Ending balance in cash & & & \\ \hline \end{tabular}
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started