Temporal Method: Problem 1 Pike Corporation, a U.S. Company, formed a subsidiary with a new company in London on January 1, 2014, by investing 500,000 British pounds in exchange for all of the subsidiary's common stock. The subsidiary purchased land for 100,000 pounds and a building for 300,000 pounds on July 1, 2014. The building is being depreciated over a 40-year life by the straight-line method. The inventory is valued on an average cost basis. The British pound is the subsidiary's functional currency and its reporting currency and has not experienced any abnormal inflation. Exchange rates for the pound on various dates were: January 1, 2014 1 pound - 1.81 (Historical rate) July 1, 2014 1 pound -1.86 December 31, 2014 1 pound - 1.83 (Current rate) 2014 average rate 1 pound - 1.82 The subsidiary's adjusted trial balance is presented below for the year ended December 31, 2014. Debits In Pounds Cash 200,000 Accounts receivable 60,000 Inventory 80,000 Land 100,000 Building 300,000 Depreciation expense 3,750 Cost of goods sold 213,750 Other expenses 90,000 Total debits 1.047.500 Credits Accumulated depreciation 3,750 Accounts payable 84,000 Accrued liabilities 16,750 Common stock 500,000 Retained earnings 0- Sales revenue 443,000 Total credits 1.047.500 Required: Prepare the subsidiaries; use the temporal method instead of the current rate method. A. Translated work papers (round to the nearest dollar) B. Translated income statement C. Translated balance sheet Temporal Method: Problem 1 Pike Corporation, a U.S. Company, formed a subsidiary with a new company in London on January 1, 2014, by investing 500,000 British pounds in exchange for all of the subsidiary's common stock. The subsidiary purchased land for 100,000 pounds and a building for 300,000 pounds on July 1, 2014. The building is being depreciated over a 40-year life by the straight-line method. The inventory is valued on an average cost basis. The British pound is the subsidiary's functional currency and its reporting currency and has not experienced any abnormal inflation. Exchange rates for the pound on various dates were: January 1, 2014 1 pound - 1.81 (Historical rate) July 1, 2014 1 pound -1.86 December 31, 2014 1 pound - 1.83 (Current rate) 2014 average rate 1 pound - 1.82 The subsidiary's adjusted trial balance is presented below for the year ended December 31, 2014. Debits In Pounds Cash 200,000 Accounts receivable 60,000 Inventory 80,000 Land 100,000 Building 300,000 Depreciation expense 3,750 Cost of goods sold 213,750 Other expenses 90,000 Total debits 1.047.500 Credits Accumulated depreciation 3,750 Accounts payable 84,000 Accrued liabilities 16,750 Common stock 500,000 Retained earnings 0- Sales revenue 443,000 Total credits 1.047.500 Required: Prepare the subsidiaries; use the temporal method instead of the current rate method. A. Translated work papers (round to the nearest dollar) B. Translated income statement C. Translated balance sheet
