World Co., a U.S. company, began operating Welt Co. a subsidiary in Germany on January 1, 2018 by acquiring...

 

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World Co., a U.S. company, began operating Welt Co. a subsidiary in Germany on January 1, 2018 by acquiring all of the common stock for 50,000 Euros. Also, on January 1, 2018 Welt borrowed €120,000 on a five-year, 10% note. The interest is payable annually beginning on January 1, 2019. A building was purchased the same day for €170,000. This building had a ten-year estimated life and no salvage value and was to be depreciated using straight-line depreciation. The building was immediately rented for three years to a local law firm for €6,000 per month. As of year-end, payments amounting to €60,000 had been received. On October 1, €5,000 were paid for repairs made on that date. This was the only transaction of this kind for the year. A cash dividend of €6,000 was paid to World Co. on December 31, 2018. Currency exchange rates were as follows: January 1, 2018 October 1, 2018 Average for 2018 December 31, 2018 €1-$1.20 €1= $1.11 €1 = $1.14 €1= $1.08 Required: Follow the example and format provided on pages 487 through 491 of the text to complete Part one and pages 494 through 495 to complete Part two. Turn in one hard copy of the completed assignment, per group, at the beginning of class on Thursday, November 21. This hard copy should be in good form, following as close as is practical, the examples in the text. Part one - Translation (assumes that the functional currency is the Euro) a. Prepare an income statement for Welt in Euros and then translate these amounts into U.S. dollars. .b. Prepare a retained earnings statement for Welt in Euros and then translate these amounts into U.S. dollars. c. Prepare a balance sheet for Welt in Euros and then translate the amounts into U.S. dollars. d. Prepare a separate calculation of the translation adjustment. Part two-Remeasurment (assumes the functional currency is the U.S. dollar) a. Prepare an income statement for Welt in Euros and then remeasure these amounts into U.S. dollars. b. Prepare a retained earnings statement for Welt in Euros and then remeasure these amounts into U.S. dollars. c. Prepare a balance sheet for Welt in Euros and then remeasure the amounts into U.S. dollars. d. Prepare a separate calculation of the remeasurement gain or loss.

Answer rating: 100% (QA)

Part One Translation a Income Statement in Euros Item Amount EUR Rental Income 60 000 Rental Expenses 5 000 Interest Expense 12 000 Depreciation Expen View the full answer