3. On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a
ID: 2422027 • Letter: 3
Question
3.
On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 74,000. RoadTime’s December 31, 20X1, trial balance in SFr is as follows:
The receivable from Popular Creek is denominated in Swiss francs. Popular Creek’s books show a $5,100 payable to RoadTime.
Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1.
Equipment is depreciated by the straight-line method with a 10-year life and no residual value. A full year’s depreciation is taken in the year of acquisition. The equipment was acquired on March 1.
Prepare a proof of the translation adjustment.
net assets at beginning of year
net income for year
dividends paid
rates at end of year
accumulated other comprehensive income translation adjustment January 1
Where is the translation adjustment reported on Popular Creek’s consolidated financial statements and its foreign subsidiary? (Select all that apply.)
Cash flow statement
statment of financial position
income statement
statement of comprehensive income
statement of retained earnings
On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 74,000. RoadTime’s December 31, 20X1, trial balance in SFr is as follows:
Explanation / Answer
1)
The revised trail balance is as follows:
Particulars
Calculation
Debit
Credit
Cash
8400
Accounts receivable
24000*0.75
18000
Receivable from Popular creek
6100*0.75
4575
Inventory
27000*0.75
20250
Plant &equipment
108000*0.73
78840
Accumulated depreciation
10700*0.73
7811
Accounts payable
5100
Bonds payable
51500*0.75
38625
Common stock
74000*0.73
54020
Sales
160000*0.75
120000
Cost of goods sold
72500*0.75
54375
Depreciation expense
10700*0.73
7811
Operating expense
35000*0.75
26250
Dividend paid
16800*0.75
12600
Total
231101
225556
Exchange difference
5545
2)
The exchange difference is adjusted in the income statement.
3)
Income statement is as follows:
Particulars
Amount
Amount
Sales
120000
Less:
Cost of gods sold
54375
Depreciation expense
7811
Operating expense
26250
Dividend expense
12600
101036
Gross income
18964
Add:
Profit on exchange difference
5545
Net income
24509
Particulars
Calculation
Debit
Credit
Cash
8400
Accounts receivable
24000*0.75
18000
Receivable from Popular creek
6100*0.75
4575
Inventory
27000*0.75
20250
Plant &equipment
108000*0.73
78840
Accumulated depreciation
10700*0.73
7811
Accounts payable
5100
Bonds payable
51500*0.75
38625
Common stock
74000*0.73
54020
Sales
160000*0.75
120000
Cost of goods sold
72500*0.75
54375
Depreciation expense
10700*0.73
7811
Operating expense
35000*0.75
26250
Dividend paid
16800*0.75
12600
Total
231101
225556
Exchange difference
5545
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