Birch Limited is a 100%-owned foreign subsidiary with operations in England. Birch was acquired by its Canadian

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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....................................................£3,000
January 1, 20X8....................................................£4,500

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
a. Assume that Birch’s functional currency is the pound sterling. Calculate the translated Canadian-dollar balances for the following accounts for 20X8:

i) Equipment;

ii) Accumulated amortization—equipment; and

iii) Amortization expense.

b. Assume that Birch’s functional currency is the Canadian dollar. Calculate the translated Canadian-dollar balances for the following accounts for 20X8:

i) Equipment;

ii) Accumulated amortization—equipment.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Advanced Financial Accounting

ISBN: 978-0132928939

7th edition

Authors: Thomas H. Beechy, V. Umashanker Trivedi, Kenneth E. MacAulay

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