Wellington Corporation is a New Zealand company. Wellington is a wholly-owned su

Question

Wellington Corporation is a New Zealand company. Wellington is a wholly-owned subsidiary of Amherst, Incorporated, an American firm. Wellington Corporation keeps its books using the New Zealand dollar (NZD). Amherst, Incorporated keeps its books using the United States dollar (USD). Wellington Corporation's financial statements require translation from NZD to USD so that consolidated financial statements for 2017 can be prepared. Financial statements (before translation) for Wellington Corporation for 2017 are presented on the next page of this exam. That page also contains some exchange rates that you may or may not need in completing the problem. The exchange rates are stated in terms of number of USD for one NZD (that is, they are direct quotes). Required: Starting with Wellington's financial statements on the next page, prepare translated financial statements for Wellington Corporation from NZD to USD. Use the temporal method to perform the translation. Show work and the translated financial statements on the next page of this exam. In completing this problem, please note the following: Assume that Wellington Corporation uses the FIFO cost flow assumption for valuing inventory, and that all inventory was acquired when one New Zealand dollar costs three U.S. dollars (USD 300 per NZD). Assume further that there is no change between beginning and ending inventory for the year ended December 31, 2017. Assume that the translated balance of Wellington Corporation's retained earnings at December 31, 2016 was USD 2,500.

Explanation / Answer

Balance Sheet December 31,2017 Item NZD Exchange rate (USD per NZD) USD Cash 3000 5 15000 Accounts Receivable 1500 5 7500 Inventory 2000 3 6000 Equipment (net of depreciation) 6000 2 12000 Land 2500 2 5000 Total 15000 45500 Accounts payable 2000 5 10000 Bonds Payable 3000 5 15000 Common Stock 5500 2 11000 Retained Earnings 4500 Already converted 2500 Transaction Adjustment 7000 Total 15000 45500 Income Statement as on December 31,2017 Revenue 6000 4.5 27000 Cost of Goods Sold -2000 4.5 -9000 Depreciation -1500 2 -3000 Other Expenses -1000 4.5 -4500 Net Income 1500 10500

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