A corporation based in East Lansing, Michigan, Kingsfield uses the U.S. dollar a
ID: 2518969 • Letter: A
Question
A corporation based in East Lansing, Michigan, Kingsfield uses the U.S. dollar as its reporting currency.
a, Assume that the subsidiary’s functional currency is the kumquat. Prepare a trial balance for it in U.S. dollars so that 2017 consolidated financial statements can be prepared.
b, Assume that the subsidiary’s functional currency is the U.S. dollar. Prepare a trial balance for it in U.S. dollars so that 2017 consolidated financial statements can be prepared.
January 1 April 1 June 1 Weighted average December 31 $ 1.71 1.59 1.66 1.64 1.62 As of December 31, 2017, the subsidiary reports the following trial balance: Debits Credits Cash Accounts receivable Equipment Accumulated depreciation Land Accounts payable Notes payable (due 2025) Common stock Dividends declared (6/1/17) Sales Salary expense Depreciation expense Miscellaneous expenses KQ 8,000 9,000 3,000 KQ600 5,000 3,000 5,000 10,000 4,000 25,000 5,000 600 9,000 KQ 43,600 Totals KQ 43,600Explanation / Answer
a. Translation of Subsidiary Trial Balance Calculation Debits Credits Cash 8,000 KQ x 1.62 $ 12,960 Accounts Receivable 9,000 KQ x 1.62 14,580 Equipment 3,000 KQ x 1.62 4,860 Accumulated Depreciation 600 KQ x 1.62 $ 972 Land 5,000 KQ x 1.62 8,100 Accounts Payable 3,000 KQ x 1.62 4,860 Notes Payable 5,000 KQ x 1.62 8,100 Common Stock 10,000 KQ x 1.71 17,100 Dividends Paid 4,000 KQ x 1.66 6,640 Sales 25,000 KQ x 1.64 41,000 Salary Expense 5,000 KQ x 1.64 8,200 Depreciation Expense 600 KQ x 1.64 984 Miscellaneous Expense 9,000 KQ x 1.64 14,760 $ 71,084 Translation Adjustment (negative) 948 $ 72,032 $ 72,032 Calculation of Translation Adjustment Net assets, 1/1 -0- -0- Increase in net assets: Common stock issued. 10,000 KQ X 1.71 $ 17,100 Sales. 25,000 KQ X 1.64 41,000 Decrease in net assets: Dividends paid.. ( 4,000) KQ X 1.66 (6,640) Salary expense.. ( 5,000) KQX 1.64 (8,200) Depreciation expense. ( 600) KQ X 1.64 (984) Miscellaneous expense . ( 9,000) KQX1.64 (14,760) Net assets, 12/31. 16,400* KQ $ 27,516 Net assets, 12/31 at current exchange rate……………. 16,400 KQX1.62 26,568 Translation adjustment (negative) $ 948 b. Remeasurement of Subsidiary Trial Balance Calculation Debits Credits Cash 8000 KQ x 1.62 $ 12,960 Accounts Receivable 9000 KQ x 1.62 14,580 Equipment 3000 KQ x 1.71 5,130 Accumulated Depreciation 600 KQ x 1.71 $ 1,026 Land 5000 KQ x 1.59 7,950 Accounts Payable 3000 KQ x 1.62 4,860 Notes Payable 5000 KQ x 1.62 8,100 Common Stock 10000 KQ x 1.71 17,100 Dividends Paid 4000 KQ x 1.66 6,640 Sales 25000 KQ x 1.64 41,000 Salary Expense 5000 KQ x 1.64 8,200 Depreciation Expense 600 KQ x 1.71 1,026 Miscellaneous Expense 9000 KQ x 1.64 14,760 $ 71,246 Remeasurement loss (debit) 840 $ 72,086 $ 72,086 Calculation of Remeasurement Loss Net monetary assets, 1/1 -0- -0- Increase in net monetary assets: Common stock issued 10000 KQ x 1.71 $ 17,100 Sales 25000 KQ x 1.64 41,000 Decrease in net monetary assets: Acquired equipment (3,000) KQ x 1.71 (5,130) Acquired land (5,000) KQ x 1.59 (7,950) Dividends paid (4,000) KQ x 1.66 (6,640) Salary expense (5,000) KQ x 1.64 (8,200) Miscellaneous expense (9,000) KQ x 1.64 (14,760) Net monetary assets, 12/31 9,000* KQ 15,420 Net monetary assets, 12/31 at current exchange rate 9000 KQ x 1.62 14,580 Remeasurement loss (debit) $ 840 * This amount can be verified as ending assets (17,000 KQ) minus ending liabilities (8,000 KQ) – net assets, 12/31 = 9,000 KQ.
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