Question

The December 31, Year 8, trial balance of SwissCo Ltd., a Swiss company, follows (in euros, €).

.:.
Additional Information:
1. SwissCo uses the periodic inventory system along with the FIFO costing method for inventory and cost of goods sold. On December 31, Year 8, the inventory balance is €120,000—it is carried at FIFO cost.
2. SwissCo capital stock was issued six years ago when the company was established; the exchange rate at that time was €1$0.30. The company purchased plant and equipment five years ago when the exchange rate was €1 $0.35; also, the note payable was made out to a local bank at the same time.
3. Revenues are earned and expenses (including cost of goods sold) are incurred uniformly throughout Year 8. Inventory available at December 31, Year 8, is purchased throughout the second half of Year 8.
4. The December 31, Year 7, balance sheet (in U.S. dollars) of SwissCo shows Retained Earnings of $61,000.
5. The spot rates for the euro in Year 8 are:
January 1, Year 8 . . . . . . . . . . . . . . . $0.32
Average for Year 8 . . . . . . . . . . . . . . $0.37
Average for second half of Year 8. . . $0.36
December 31, Year 8. . . . . . . . . . . . . $0.38
6. Management determined the functional currency of SwissCo is the euro. Therefore, use the current rate method.

Required:
a. Prepare a trial balance in U.S. dollars for SwissCo as of December 31, Year 8.
b. Prepare an income statement for the year ended December 31, Year 8, and the balance sheet at December 31, Year 8 (both in U.S. dollars) for SwissCo.
c. Assume Unisco Corporation, a U.S. firm, purchases a 75% ownership interest in SwissCo at book value on January 1, Year 8. Prepare the entry Unisco makes at December 31, Year 8, to record its equity in SwissCo’s Year8 earnings. Unisco Corp. uses the equity method in accounting for its investment in SwissCo.



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  • CreatedJanuary 22, 2015
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