On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an
Question:
On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 60,000. RoadTime’s December 31, 20X1, trial balance in SFr is as follows: |
Debit | Credit | |||
Cash | SFr | 7,000 | ||
Accounts Receivable (net) | 20,000 | |||
Receivable from Popular Creek | 5,000 | |||
Inventory | 25,000 | |||
Plant & Equipment | 100,000 | |||
Accumulated Depreciation | SFr | 10,000 | ||
Accounts Payable | 12,000 | |||
Bonds Payable | 50,000 | |||
Common Stock | 60,000 | |||
Sales | 150,000 | |||
Cost of Goods Sold | 70,000 | |||
Depreciation Expense | 10,000 | |||
Operating Expense | 30,000 | |||
Dividends Paid | 15,000 | |||
Total | SFr | 282,000 | SFr | 282,000 |
Additional Information | |
1. | The receivable from Popular Creek is denominated in Swiss francs. Popular Creek’s books show a $4,000 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 U.S. dollar is the functional currency for the foreign subsidiary. |
Required: |
Prepare a proof of the remeasurement gain or loss. (Amounts to be deducted should be entered with a minus sign. Round "exchange rate" answers to 2 decimal places.) |
Fundamentals of Financial Management
ISBN: 9780273713630
13th Revised edition
Authors: James van Horne, John Wachowicz