Question

Birch Limited is a 100%-owned foreign subsidiary with operations in England. Birch was acquired by its Canadian parent on January 1, 20X7. The financial records of Birch are maintained in pounds sterling (£) and provide the following information related to its equipment:
Date of Purchase............................................................................................. Cost of Purchase
January 1, 20X7.............................................................................................. £ 1,000
January 1, 20X8.............................................................................................. £ 1,500
The equipment is being amortized on a straight-line basis over its estimated useful life of 10 years.
Foreign exchange rates were as follows:
January 1, 20X6.............................................................................................. £ 1 = C$ 1.50
Average for 20X6............................................................................................ £ 1 = C$ 1.51
January 1, 20X7............................................................................................... £ = 1 C$ 1.55
Average for 20X7............................................................................................ £ 1 = C$ 1.58
January 1, 20X8................................................................................................ £ 1 = C$ 1.63
Average for 20X8............................................................................................. £ 1 = C$ 1.47
December 31, 20X8.......................................................................................... £ = 1 C$ 1.40
Birch’s financial statements must be translated into Canadian dollars so that they can be consolidated with the financial statements of the Canadian parent.

Required
1. Assume that Birch’s functional currency is the pound sterling. Calculate the translated Canadian-dollar balances for the following accounts for 20X8:
a) Equipment
b) Accumulated amortization— equipment
c) Amortization expense
2. Assume that Birch’s functional currency is the Canadian dollar. Calculate the translated Canadian-dollar balances for the following accounts for 20X8:
a) Equipment
b) Accumulated amortization—equipment



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  • CreatedMarch 13, 2015
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