Problem $2$

Broadmore Company began operating a subsidiary in a foreign country on January $1,2018,$ by acquiring all of its common stock for $80,000$ krones, which was equal to fair value. This subsidiary immediately borrowed $200,000$ krones on a five$-$year note with $10$ percent interest payable annually beginning on January $1,2019.$ The subsidiary then purchased for $280,000$ krones a building that had a $10-$year anticipated life and no salvage value and is to be depreciated using the straight$-$line method. The subsidiary rented the building for three years to a group of local doctors for $10,000$ krones per month. By year$-$end, payments totaling $100,000$ krones had been received. On October $1,8,000$ krones were paid for a repair made on that date. The subsidiary transferred a cash dividend of $10,000$ krones back to Broadmore on December $31,2018.$

The functional currency for the subsidiary is the krone. Currency exchange rates for $1$ krone

follow:

$$

$$ January $1,2015$ $$1\mathrm{.}90=1$ krone

$$ October $1,20151\mathrm{.}75=1$ krone

$$ Average for $20151\mathrm{.}80=1$ krone

$$ December $31,20151\mathrm{.}70=1$ krone

Prepare an income statement, statement of retained earnings, and balance sheet for this subsidiary in krones and then translate these amounts into U$.$S$.$ dollars.