CASES CASE 1. LO5 (32 marks) Panda Corporation, a U.S. company, formed a British subsidiary on January 1, 2014 by investing 450,000 British pounds () in exchange for all of the subsidiary's no-par common stock. The British subsidiary, Sky Corporation, purchased real property on April 1, 2014 at a cost of 500,000, with 100,000 allocated to land and 400,000 allocated to a building. The building is depreciated over a 40-year estimated useful life on a straight-line basis with no salvage value. The British pound is Sky's functional currency and its reporting currency. The British economy does not have high rates of inflation. Exchange rates for the pound on various dates were: January 01, 2014 = 1 = $1.60 April 01, 2014 = 1 = $1.61 December 31, 2014 =1= $1.68 2014 average rate= 1 = $1.66