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Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital In the amount of 77,000 pounds.
Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital In the amount of 77,000 pounds. The subsidiary immediately borrowed 147,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 224,000 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 8,400 pounds per month. By year-end, rent payments totaling 84,000 pounds had been received, and 16,800 pounds was in accounts receivable. On October 1, 2020, 3,800 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 12,700 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 1 Pound $2.10 2.15 1 2.18 1 2.14= 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.) SULLIVAN'S ISLAND COMPANY Statement of Cash Flows Pounds Exchange Rate: U.S. Dollars Operating Activities Net income 59,000 Add Depreciation expenses 21,800 Less Increase in accounts receivable (2,180)
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