On January 1, 2016, Safetyway Group, a U.S. company, formed a Swiss subsidiary,
ID: 2607424 • Letter: O
Question
On January 1, 2016, Safetyway Group, a U.S. company, formed a Swiss subsidiary, TEurope AG. The subsidiary issued all of its currently outstanding common stock on that date. Selected accounts from its balance sheets on December 31, 2016 and 2017, all of which are shown in Swiss francs (CHF), are as follows:
December 31
Additional Information:
1. Exchange rates are as follows:
2. An analysis of inventories, for which the FIFO inventory method is used, is as follows:
3. On January 1, 2016, TEurope purchased land for CHF24,000 and plant and equipment for CHF140,000. On July 4, 2017, additional equipment was purchased for CHF30,000. Plant and equipment is depreciated on a straight-line basis over a ten-year period with no salvage value. A full year’s depreciation is taken in the year of purchase.
Required
a. Prepare a schedule remeasuring the selected accounts above into U.S. dollars (the functional currency) at December 31, 2017, and December 31, 2016, respectively. Show supporting computations in good form.
b. Prepare a schedule translating the selected accounts above into U.S. dollars at December 31, 2017, and December 31, 2016, assuming the Swiss franc is the functional currency.
(in millions) 2017 2016 Accounts receivable, net CHF 40,000 CHF 35,000 Inventories, at cost 80,000 75,000 Property, plant and equipment, net of accumulated depreciation of CHF31,000 at December 31, 2017 and CHF14,000 at December 31, 2016 163,000 150,000 Long-term debt 100,000 120,000 Common stock 10,000 shares authorized, issued and outstanding 5,000 shares at December 31, 2017 and December 31, 2016 50,000 50,000Explanation / Answer
a. Calculation of accounts in U.S Dollars.
Particulars
Rate on Date
Rate of Exchange
2017 / 2016
2017
2016
Accounts Receivable
Closing Rate
1.13 / 1.04
40,000 / 1.13 = 35,398.23
35,000 / 1.04 = 33,653.85
Closing Inventory
Closing Rate
1.13 / 1.04
80,000 / 1.13 = 70,796.46
75,000 / 1.04 = 72,115.38
Land
Date of purchase
0.96
25,000
24,000 / 0.96 = 25,000
Equipment
Note Below
90,541.84
132,371.80
Long-term debt
Closing Rate
1.13 / 1.04
100,000 / 1.13 = 88,495.58
120,000 / 1.04 = 115,384.62
Share Capital
Date of transaction
0.96
50,000 / 0.96 = 52,083.33
50,000 / 0.96 = 52,083.33
Note: Calculation of Equipment & Depreciation
Particulars
CHF
Rate
Amount in $
Purchase on 1st Jan 2016
140,000
0.96
140,000 / 0.96 = 145,833.33
Depreciation
14,000
1.04
14,000 / 1.04 = 13,461.54
Closing on 31st Dec 2016
132,371.80
Purchase on 4th July
30,000
1.12
30,000 / 1.12 = 26,785.71
Depreciation
14,000 + 3,000 = 17,000
1.13
17,000 / 1.13 = 15,044.25
Closing Value on 31st Dec 2017
90,541.84
Particulars
Rate on Date
Rate of Exchange
2017 / 2016
2017
2016
Accounts Receivable
Closing Rate
1.13 / 1.04
40,000 / 1.13 = 35,398.23
35,000 / 1.04 = 33,653.85
Closing Inventory
Closing Rate
1.13 / 1.04
80,000 / 1.13 = 70,796.46
75,000 / 1.04 = 72,115.38
Land
Date of purchase
0.96
25,000
24,000 / 0.96 = 25,000
Equipment
Note Below
90,541.84
132,371.80
Long-term debt
Closing Rate
1.13 / 1.04
100,000 / 1.13 = 88,495.58
120,000 / 1.04 = 115,384.62
Share Capital
Date of transaction
0.96
50,000 / 0.96 = 52,083.33
50,000 / 0.96 = 52,083.33
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