On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an
Question:
Debit | Credit | |||
Cash | SFr | 8,800 | ||
Accounts Receivable (net) | 24,500 | |||
Receivable from Popular Creek | 6,500 | |||
Inventory | 27,000 | |||
Plant & Equipment | 103,000 | |||
Accumulated Depreciation | SFr | 11,700 | ||
Accounts Payable | 12,300 | |||
Bonds Payable | 53,000 | |||
Common Stock | 76,000 | |||
Sales | 149,600 | |||
Cost of Goods Sold | 71,000 | |||
Depreciation Expense | 11,700 | |||
Operating Expense | 34,500 | |||
Dividends Paid | 15,600 | |||
Total | SFr | 302,600 | SFr | 302,600 |
Additional Information
1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek’s books show a $5,500 payable to RoadTime.
2. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1.
3. Equipment is depreciated by the straight-line method with a 10-year life and no residual value. A full year’s depreciation is taken in the year of acquisition. The equipment was acquired on March 1.
4. The dividends were declared and paid on November 1.
5. Exchange rates were as follows:
SFr | $ | ||
January 1 | 1 | = | 0.73 |
March 1 | 1 | = | 0.74 |
November 1 | 1 | = | 0.77 |
December 31 | 1 | = | 0.80 |
20X1 average | 1 | = | 0.75 |
6. The Swiss franc is the functional currency.
Required:
a. Prepare a proof of the translation adjustment.
POPULAR CREEK CORPORATION AND SUBSIDIARY | |
Proof of Translation Adjustment | |
Year Ended December 31, 20X1 | |
U.S Dollars | |
Net assets at beginning of year | |
Adjustment for changes in net asset position during year: | |
Net income for year | |
Dividends paid | |
Net assets translated at: | |
Rates during year | 0 |
Rates at end of year | |
Change in other comprehensive income translation adjustment during year net increase | |
Accumulated other comprehensive income translation adjustment January 1 | |
Change in other comprehensive income translation adjustment December 31 | 0 |
b. Where is the translation adjustment reported on Popular Creek’s consolidated financial statements and its foreign subsidiary? (Select all that apply.)
*Cash flow statement
*statement of financial position
*income statement
*statement of comprehensive income
*statement of retained earnings
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker