Xcel 33. Livingston Company is a wholly owned subsidiary of Rose Corporation. Livingston operates in a foreign country with financial statements recorded in goghs (GH), the company's functional currency. Financial statements for the year 2017 are as follows: Income Statement For Year Ending December 31, 2017 Sales GH 270,000 Cost of goods sold (155,000) Gross profit 115,000 Less: Operating expenses (54,000) Gain on sale of equipment 10,000 Net income GH 71,000 Statement of Retained Earnings For Year Ending December 31, 2017 Retained earnings, 1/1/17 GH 216,000 Net income 71,000 Less: Dividends (26,000) Retained earnings, 12/31/17 G H 261,000 Balance Sheet December 31, 2017 Assets Cash GH 44,000 Receivables 116,000 Inventory 58,000 Property, plant and equipment (net) 339,000 Total assets GH 557,000 Liabilities and Equities Liabilities GH 176,000 Common stock 120,000 Retained earnings, 12/31/17 261,000 Total liabilities and equities GH 557,000 Page 432 Additional Information The common stock was issued in 2010 when the exchange rate was $2.08 per GH; property plant, and equipment was acquired in 2011 when the rate was $2.00 per GH. As of January 1, 2017, the retained earnings balance was translated as $396,520. The U.S.$ per GH exchange rates for 2017 follow: January 1 April 1 September 1 1 December 31 Weighted average $1.67 1.61 .72 1.54 1.59 Inventory was acquired evenly throughout the year. The December 31, 2016, balance sheet reported a translation adjustment with a debit balance of $85,000. Dividends were declared on April 1, 2017, and a piece of equipment was sold on September 1, 2017. Assume that the gogh is Livingston Company's functional currency. Translate the 2017 foreign currency financial statements into the parent's reporting currency, the U.S. dollar. Chapter 8 Problem 33 - Temporal Additional Assumptions Necessary for Temporal Method 1 Beginning Inventory in US$ was $96,000 2 Ending inventory was acquired over the last 3 months of the year, during which the exchange rate averaged $1.65 3 Note that I broke a 12,000 depreciation expense out of the Operating Expense category Rate Dollars Income Statement: Sales COGS Gross Profit Depreciation Operating Expenses Gain on Sale of Equipment Foreign Translation Gain or Loss Net Income goghs 270,000 155,000 115,000 (12,000) (42,000) 10,000 71,000 Given 396,520 Statement of Retained Earnings: Balance 1/1/09 Net Income Dividends Balance 12/31/2009 216,000 71,000 (26,000) 261,000 Balance Sheet: Cash Receivables Inventory Fixed Assets (Net) Total 44,000 121,000 53,000 339,000 557,000 Liabilities Common Stock Retained Earnings; 176,000 120,000 261,000 557,000 Given 96,000 Calculation of COGS: Beginning Inventory Plus Purchases Less Ending Inventory COGS 60,000 148,000 53,000 155,000 Calculation of Gain on Sale of Equipment Proceeds Less Book Value Gain 45,000 35,000 10,000
