Great Balls of Fire (GBF) Manufacturing is a British subsidiary of RJK, Inc, a U
ID: 2485972 • Letter: G
Question
Great Balls of Fire (GBF) Manufacturing is a British subsidiary of RJK, Inc, a US company Required: Using the Current Rate Method, translate GBF's Balance Sheet and Statement of Income and Retained Earnings into U.S Dollars. Relevant exchange rates... S per £ Rates in effect when capital stock was issued..............................1.85 December 31, 20 December 31, 20x 1.55 une 30, 20x1. Retained Earnings, December 31, 20x0 (current rate method).$11,560 Balance Sheet, GBF Mfg., at December 31, 20x1, Pounds Sterling (in thousands) exchange rate Current Assets . 4,500 4.50 Fixed Assets Building (cost £10,000). Total Fixed Assets Total Assets Liabilities and Stockholders' Equity .14,000 Current Liabilities. Long-term liabilities Deferred Income Taxes.. Total Long-ter. ....5,500 Stockholders' Equity Retained Earnings Accumulated translation adjustment Total Liabilities and Stockholders' EquityExplanation / Answer
The Current Rate Method
All assets and liabilities are translated at the rate in effect on the balance sheet date.
All items on the income statement are translated at an appropriate average exchange rate or at the rate prevailing when the various revenues, expenses, gains and losses were incurred (historical rate).
Dividends paid are translated at the rate in effect on the payment date.
Common stock, paid-in capital and retained earnings are translated at historical rates.
Balance Sheet, GBF Mfg., at December 31,20x1. Pounds Sterling (in thousands) Assets Current Assets £ Exchange Rate $ Cash and receivables 4,000 1.56 6,240 Inventory 4,500 1.56 7,020 Total Current Assets 8,500 1.56 13,260 Fixed Assets Land 3,000 1.56 4,680 Building (cost £10,000) 7,000 1.56 10,920 Equipment (cost£ 10,000) 4,000 1.56 6,240 Total Fixed Assets 14,000 1.56 21,840 Total Assets 22,500 1.56 35,100 Liabilities and Stockholders’ Equity Current Liabilities 5,500 1.56 8,580 Long-term liabilities Notes Payable 3,000 1.56 4,680 Deferred Income Taxes 2,500 1.56 3,900 Total Long-term 5,500 1.56 8,580 Stockholders’ Equity Capital Stock 5,000 1.85 9,250 Retained Earnings 6,500 13,845 Accumulated translation adjustment - 3,415 Total Stockholders’ Equity 11,500 26,510 Total Liabilities and Stockholders' Equity 22,500 35,090Related Questions
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