On January 1, 2022, Joey Co. acquired a subsidiary in Italy named Legoria Co. Legoria's functional currency is the EURO which is also its local currency (LCU) (i.e. the currency in which Legoria Co. maintains its records). Selected exchange rates are as follows:

January 1, 2022, 1 FCU = $1.00

December 31, 2022, 1 FCU = $1.08

2022 average 1 FCU = $1.05

The following Trial balance for Legoria is available for 12/31/22

Account	Balance in Euros
Cash	10,000 FCU
Accounts Receivable	21,000
Allowance for doubtful accts.	(1,000)
Due From Joey	14,000
Inventory	30,000
Prepaid Insurance	3,000
Land	18,000
Depreciable Assets	120,000
Accumulated Depreciation	(15,000)
Cost of Goods Sold	180,000
Depreciation Expense	10,000
Income Tax Expense	30,000
Other Expenses	23,000
Total	443,000 FCU
Accounts Payable	20,000 FCU
Taxes Payable	30,000
Accrued Interest Payable	1,000
Bonds Payable	10,000
Common Stock	80,000
Retained Earnings 1/1/22	20,000
Sales	282,000
Total	443,000 FCU

1). Required: Prepare a schedule translating the 12/31/22 trial balance into the reporting currency of Joey Co. in order to facilitate the consolidation process.

2). Assuming Parent Uses Equity Method, what is the Journal entry the Parent would make on its books to account for the Translation Adjustment?

3). Would Joey Co. need to Record a Consolidation Entry to Consolidate Legoria Co. on 12/31/22 related to the Translation Adjustment.

A). Yes or No.

B). If the answer in part A is yes, describe the entry needed. If the answer is No, describe why the entry is not needed

Answer rating: 100% (QA)

1 Schedule of translation of trial balance Items Balance Exchange rate Balance Cash 10000 108 10800 ... View the full answer