Kerry Manufacturing Company is a German subsidiary of a U.S. company. Kerry reco
ID: 2412015 • Letter: K
Question
Kerry Manufacturing Company is a German subsidiary of a U.S. company. Kerry records its operations and prepares financial statements in euros. However, its functional currency is the British pound. Kerry was organized and acquired by the U.S. company on June 1, 20X4. The cumulative translation adjustment as of December 31, 20X6, was $79,860. The value of the subsidiary's retained earnings expressed in British pounds and U.S. dollars as of December 31, 20X7, was 365,000 pounds and $618,000, respectively. On March 1, 20X7, Kerry declared a dividend of 120,000 euros. The trial balance of Kerry in euros as of December 31, 20X7, is as follows: Debit Credit Cash 240,000 Accounts Receivable (net) 2,760,000 Inventory (at cost) 3,720,000 Marketable Securities (at cost) 2,040,000 Prepaid Insurance 210,000 Depreciable Assets 8,730,000 Accumulated Depreciation 1,417,000 Cost of Goods Sold 17,697,000 Selling, General, and Administrative Expense 4,762,000 Sales Revenue 26,430,000 Investment Income 180,000 Accounts Payable 2,120,000 Unearned Sales Revenue 960,000 Loans and Mortgage Payable 5,872,000 Common Stock 1,500,000 Paid-in Capital in Excess of Par 210,000 Retained Earnings 1,470,000 Total 40,159,000 40,159,000 The marketable securities were acquired on November 1, 20X6, and the prepaid insurance was acquired on December 1, 20X7. The cost of goods sold and the ending inventory are calculated by the weighted-average method. The following items are measured in pound at the December 31, 20x7. Euros Pounds Accumulated depreciation Depreciable Assets 8,730,000 2,671,380 Cost of Goods Sold 17,697,000 5,262,294 Selling, General, Admin. Expense 4,762,000 1,415,886 Accumulated Depreciation 1,417,000 773,915 Sales Revenue 26,430,000 7,866,030 On November 1, 20X6, Kerry received a customer prepayment valued at 3,000,000 euros. On February 1, 3000000 20X7, 2,040,000 euros of the prepayment was earned. The balance remains unearned as of December 31, 2040000 20X7. 960000 Relevant exchange rates are as follows: Pounds/Euro $/Pound June 1, 20X4 0.31 $1.60 March 1, 20X6 0.3 $1.64 November 1, 20X6 0.305 $1.65 December 31, 20X6 0.31 $1.68 February 1, 20X7 0.302 $1.67 March 1, 20X7 0.3 $1.66 December 1, 20X7 0.29 $1.64 December 31, 20X7 0.288 $1.64 20X7 average 0.297 $1.66 Required: Prepare a remeasured and translated trial balance of the Kerry Manufacturing Company as of December 31, 20X7. ANS: Kerry Manufacturing Company Trial Balance Translation December 31, 20X7 Relevant Relevant Exchange Exchange Balance in Rate Balance in Rate Balance in Account Euros (Pds/Euros) Pounds ($/Pds) Dollars Cash 240,000 Accounts Receivable (net) 2,760,000 Inventory (at cost) 3,720,000 Marketable Securities (at cost) 2,040,000 Prepaid Insurance 210,000 Depreciable Assets 8,730,000 Cost of Goods Sold 17,697,000 Selling, General, Admin. Expense 4,762,000 Exchange Loss Total Debits 40,159,000 12,183,001 20,117,316 Accumulated Depreciation 1,417,000 Sales Revenue 26,430,000 Investment Income 180,000 Accounts Payable 2,120,000 Unearned Sales Revenue 960,000 Loans and Mortgage Payable 5,872,000 Common Stock 1,500,000 Paid-in Capital in Excess of Par 210,000 Retained Earnings 1,470,000 Cumulative Translation Adjustment 0 -19,392 Total Credits 40,159,000 12,183,001 20,117,316 Kerry Manufacturing Company is a German subsidiary of a U.S. company. Kerry records its operations and prepares financial statements in euros. However, its functional currency is the British pound. Kerry was organized and acquired by the U.S. company on June 1, 20X4. The cumulative translation adjustment as of December 31, 20X6, was $79,860. The value of the subsidiary's retained earnings expressed in British pounds and U.S. dollars as of December 31, 20X7, was 365,000 pounds and $618,000, respectively. On March 1, 20X7, Kerry declared a dividend of 120,000 euros. The trial balance of Kerry in euros as of December 31, 20X7, is as follows: Debit Credit Cash 240,000 Accounts Receivable (net) 2,760,000 Inventory (at cost) 3,720,000 Marketable Securities (at cost) 2,040,000 Prepaid Insurance 210,000 Depreciable Assets 8,730,000 Accumulated Depreciation 1,417,000 Cost of Goods Sold 17,697,000 Selling, General, and Administrative Expense 4,762,000 Sales Revenue 26,430,000 Investment Income 180,000 Accounts Payable 2,120,000 Unearned Sales Revenue 960,000 Loans and Mortgage Payable 5,872,000 Common Stock 1,500,000 Paid-in Capital in Excess of Par 210,000 Retained Earnings 1,470,000 Total 40,159,000 40,159,000 The marketable securities were acquired on November 1, 20X6, and the prepaid insurance was acquired on December 1, 20X7. The cost of goods sold and the ending inventory are calculated by the weighted-average method. The following items are measured in pound at the December 31, 20x7. Euros Pounds Accumulated depreciation Depreciable Assets 8,730,000 2,671,380 Cost of Goods Sold 17,697,000 5,262,294 Selling, General, Admin. Expense 4,762,000 1,415,886 Accumulated Depreciation 1,417,000 773,915 Sales Revenue 26,430,000 7,866,030 On November 1, 20X6, Kerry received a customer prepayment valued at 3,000,000 euros. On February 1, 3000000 20X7, 2,040,000 euros of the prepayment was earned. The balance remains unearned as of December 31, 2040000 20X7. 960000 Relevant exchange rates are as follows: Pounds/Euro $/Pound June 1, 20X4 0.31 $1.60 March 1, 20X6 0.3 $1.64 November 1, 20X6 0.305 $1.65 December 31, 20X6 0.31 $1.68 February 1, 20X7 0.302 $1.67 March 1, 20X7 0.3 $1.66 December 1, 20X7 0.29 $1.64 December 31, 20X7 0.288 $1.64 20X7 average 0.297 $1.66 Required: Prepare a remeasured and translated trial balance of the Kerry Manufacturing Company as of December 31, 20X7. ANS: Kerry Manufacturing Company Trial Balance Translation December 31, 20X7 Relevant Relevant Exchange Exchange Balance in Rate Balance in Rate Balance in Account Euros (Pds/Euros) Pounds ($/Pds) Dollars Cash 240,000 Accounts Receivable (net) 2,760,000 Inventory (at cost) 3,720,000 Marketable Securities (at cost) 2,040,000 Prepaid Insurance 210,000 Depreciable Assets 8,730,000 Cost of Goods Sold 17,697,000 Selling, General, Admin. Expense 4,762,000 Exchange Loss Total Debits 40,159,000 12,183,001 20,117,316 Accumulated Depreciation 1,417,000 Sales Revenue 26,430,000 Investment Income 180,000 Accounts Payable 2,120,000 Unearned Sales Revenue 960,000 Loans and Mortgage Payable 5,872,000 Common Stock 1,500,000 Paid-in Capital in Excess of Par 210,000 Retained Earnings 1,470,000 Cumulative Translation Adjustment 0 -19,392 Total Credits 40,159,000 12,183,001 20,117,316Explanation / Answer
Trial balance of Kerry Manufacturing Company
Accounts
Balance in Euros
Relevant exchange rate (Pds/Euros)
Balance in Pounds
Relevant exchange rate ($/Pds)
Balance in Dollars
Cash
240000
0.288
69120
1.64
113356.8
Accounts receivable (Net)
2760000
0.288
794880
1.64
1303603
Inventory at cost
3720000
0.297
1104840
1.66
1834034
Marketable securities at cost
2040000
0.305
622200
1.65
1026630
Prepaid insurance
210000
0.29
60900
1.64
99876
Depreciable assets
8730000
0.288
2514240
1.64
4123354
Costs of goods sold
17697000
0.297
5256009
1.66
8724975
Selling, general and administrative exp.
4762000
0.297
1414314
1.66
2347761
Exchange loss
6399
Total debits
40159000
11842902
19573590
Accumulated depreciation
1417000
0.288
408096
1.64
669277.4
Sales revenue
26430000
0.297
7849710
1.66
13030519
Investment income
180000
0.297
53460
1.66
88743.6
Accounts payable
2120000
0.288
610560
1.64
1001318
Unearned sales revenue
960000
0.288
276480
1.64
453427.2
Loans and mortgage payable
5872000
0.288
1691136
1.64
2773463
Common stock
1500000
0.31
465000
1.6
744000
Paid in capital in excess of par
210000
0.31
65100
1.6
104160
Retained earnings
1470000
0.288
423360
1.64
694310.4
Cumulative translation
Adjustments
14371.5
Total credits
40159000
11842902
19559219
Trial balance of Kerry Manufacturing Company
Accounts
Balance in Euros
Relevant exchange rate (Pds/Euros)
Balance in Pounds
Relevant exchange rate ($/Pds)
Balance in Dollars
Cash
240000
0.288
69120
1.64
113356.8
Accounts receivable (Net)
2760000
0.288
794880
1.64
1303603
Inventory at cost
3720000
0.297
1104840
1.66
1834034
Marketable securities at cost
2040000
0.305
622200
1.65
1026630
Prepaid insurance
210000
0.29
60900
1.64
99876
Depreciable assets
8730000
0.288
2514240
1.64
4123354
Costs of goods sold
17697000
0.297
5256009
1.66
8724975
Selling, general and administrative exp.
4762000
0.297
1414314
1.66
2347761
Exchange loss
6399
Total debits
40159000
11842902
19573590
Accumulated depreciation
1417000
0.288
408096
1.64
669277.4
Sales revenue
26430000
0.297
7849710
1.66
13030519
Investment income
180000
0.297
53460
1.66
88743.6
Accounts payable
2120000
0.288
610560
1.64
1001318
Unearned sales revenue
960000
0.288
276480
1.64
453427.2
Loans and mortgage payable
5872000
0.288
1691136
1.64
2773463
Common stock
1500000
0.31
465000
1.6
744000
Paid in capital in excess of par
210000
0.31
65100
1.6
104160
Retained earnings
1470000
0.288
423360
1.64
694310.4
Cumulative translation
Adjustments
14371.5
Total credits
40159000
11842902
19559219
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