On January 1, 2014, Trenten Systems, a U.S.-based company, purchased a controlli

Question

On January 1, 2014, Trenten Systems, a U.S.-based company, purchased a controlling interest in Grant Management Consultants located in Zurich, Switzerland. The acquisition was treated as a purchase transaction. The 2014 financial statements stated in Swiss francs are given below.

Direct exchange rates for Swiss franc are:

1. Translate the year-end balance sheet and income statement of the foreign subsidiary using the current rate method of translation.

2. Prepare a schedule to verify the translation adjustment.

GRANT MANAGEMENT CONSULTANTS
Comparative Balance Sheets
January 1 and December 31, 2014 Jan. 1 Dec. 31 Cash and Receivables 20,000 54,400 Net Property, Plant, and Equipment 40,500 36,600    Totals 60,500 91,000 Accounts and Notes Payable 29,900 32,100 Common Stock 20,200 20,200 Retained Earnings 10,400 38,700    Totals 60,500 91,000

Explanation / Answer

GRANT MANAGEMENT CONSULTANTS

BALANCE SHEET

AS ON 31 DECEMBER 2014 (Amt. in $)

Cash and Receivables (54400*.5321) = 28946.24

Net Property,Plant and Equipment (36,600*.5321) = 19474.86

TOTALS = 48421.10

Accounts and Notes Payables (32100*.5321) = 17080.41

Common Stock (20200*.5321) = 10748.42

Retained Earnings (38700*.5321) = 20592.27

TOTALS 48421.10

NOTE:- The above balance sheet figures are converted in dollor by taking the closing exchange rate as mentioned in above table. ( 1FF = $ 0.5321)

Consolidated Income and Retained Earnings Statement

For the Year Ended 31 December, 2014

Revenues (73000*0.5654) = 41274.20

Less : Operating Expenses including depreciation (29400*0.5654) = 16622.76

Net Income = 24651.44

Less : Dividend Declared and Paid (15300*0.5810) = 8889.30

Net Increase in Retained Earnings = 15762.14

NOTE : The figures of Revenues and Operating expenses are converted in dollor by taking the average for 2014 rate of dollor i.e. 1FF = $ 0.5654 and for dividend declared and payment, the specific rate as provided in the table is used i.e. 1FF = $ 0.5810

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