Subject : Advanced Accounting

ASSIGNMENT 3 Translation - Local Currency is the Functional Currency On January 2, 2019, P Company, a U.S.-based company, acquired for 2,000,000 francs an 80% interest in SFr Company, a Swiss company. On January 2, 2019. SFr Company reported a retained earnings balance of 480,000 francs. Sit's books are maintained in Swiss francs and are in conformity with U.S. generally accepted accounting principles. Trial balances of the two companies as of December 31, 2020, are presented here: Debita Cash Accounts Receivable Inventaries (PIFO COD) Investment in SFr Company Land Building (net) Equipment (neto Dividends Declared Cost of Goods Sold Depreciation Expense Other Expense Income Tax Expense Totals Credits Accounts Payable Short-Term Notes Pavable Bonds Payable Common Stock Additional Paid in Capital Retained Earnings 1/2 Sales Equity Income Totals P Company (Dallara) SFr Company (France) 500,000 62.500 516.400 660,000 67.boo 1,037.500 297.306 450.000 500,000 610,000 550,000 290,000 405.000 200,000 375.000 3,720,000 2.312.500 110,000 185.000 914,000 18.750 100.000 102 500 2.3.15 540,000 300.000 700,000 800,000 300,000 540,8 4.800,000 800,000 690,750 850,000 960,000 300,000 513.000 3.775.000 6,306 2130 Other information related to the subsidiary follows: 1. Beginning inventory of 830,000 francs was acquired when the exchange rate was $1.078. 2. Purchases made uniformly throughout 2020 were 2,520,000 francs. 3. The franc is identified as the subsidiary's functional currency. 4. The subsidiary's beginning (1/1/20) retained earnings and cumulative translation adjustment (credit) in dollars were $75,948 and $36,462, respectively. 5. All plant assets were acquired before the parent obtained a controlling interest in the subsidiary. 6. Sales are made and all expenses are incurred uniformly throughout the year. 7. The ending inventory was acquired during the last quarter. 8. The subsidiary declared and paid dividends of 375,000 francs on September 2. 9. The following direct exchange rate quotations were available: 7. The ending inventory was acquired during the last quarter. 8. The subsidiary declared and paid dividends of 375,000 francs on September 2. 9. The following direct exchange rate quotations were available: Date of subsidiary acquisition 81.07 Average for 2014 1.075 January 1, 2015 LOB September 2, 2015 1.09 December 31, 2015 1.10 Average for the fourth quarter, 2015 1095 Average for 2015 1085 Required: 1. Prepare a translated balance sheet and combined statement of income and retained earnings for the subsidiary. 2. Prepare a schedule to verify the translation adjustment. 3. Compute the following ratios based on the franc and the U.S. dollar financial statements: 1. Current ratio. 2. Debt to equity. 3. Gross profit percentage. 4. Net income to sales