PWA Corporation paid $1,710,000 for 100 percent of the stock of SAA Corporation on January 1, 2011, when the stockholders' equity of SAA consisted of 5,000,000 LCU capital stock and 3,000,000 LCU retained earnings. SAA's functional currency is the local currency unit, and any cost/book value differential is attributable to a patent with a 10-year amortization period.

On July 1, 2011, PWA advanced $333,000 (1,800,000 LCU) to SAA when the exchange rate was $0.185. The advance is short-term and denominated in U.S. dollars.

Relevant exchange rates for LCUs for 2011 are as follows:

Rate at acquisition on January 1 ........ $0.190

Rate applicable to the advance on July 1 ..... 0.185

Rate applicable to dividends on September 1 ... 0.185

Average rate for the year .......... 0.185

Current rate at December 31 ......... 0.180

A translation worksheet for SAA's adjusted trial balance at December 31, 2011, is as follows:

Financial statements for PWA and SAA at and for the year ended December 31, 2011, are summarized as follows:

REQUIRED1. Prepare journal entries on PWA's books to account for its investment in SAA for 2011.2. Prepare consolidation working papers for PWA Corporation and Subsidiary for the year ended December 31,2011.

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Exchange U.S. LCUS Rate Dollars Debits $ 99,000 90,000 270,000 288,000 540,000 900,000 740,000 9,250 185,000 84,750 $3,206,000 550,000 500,000 1,500,000 1,600,000 3,000,000 5,000,000 4,000,000 50,000 1,000,000 Cash Accounts receivable-net $0.180 C 0.180 C 0.180 C Inventories Land 0.180 C Equipment-net Buildings-net Expenses Exchange loss (advance) Dividends Equity adjustment from translation 0.180 C 0.180 C 0.185 A 0.185 A 0.185 R 17,200,000 Credits $ 135,000 108,000 333,000 950,000 570,000 $0.180 C Accounts payable Other liabilities 750,000 600,000 1,850,000 5,000,000 3,000,000 0.180 C Advance from PWA (short-term) Capital stock Retained earnings January 1 0.180 C 0.190 H 0.190 H 0.185 A Sales 6,000,000 17,200,000 1,110,000 $3,206,000