Question
ullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2017, by investing capital in the amount of 50,000 pounds. The
ullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2017, by investing capital in the amount of 50,000 pounds. The subsidiary immediately borrowed 144,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2018. The subsidiary then purchased for 194,000 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, 2017, the subsidiary rented the building for three years to a group of local attorneys for 7,700 pounds per month. By year-end, rent payments totaling 77,000 pounds had been received, and 15,400 pounds was in accounts receivable. On October 1, 3,600 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,700 pounds back to Sullivan's Island Company on December 31, 2017. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound follow: January 1, 2017 $ 2.00 = 1 Pound October 1, 2017 2.05 = 1 December 31, 2017 2.08 = 1 Average for 2017 2.04 = 1
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