On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 60,000. RoadTime's December 31, 20X1, Trial balance in SFr is as follows: Debit (SFr) Credit (SFr) Cash 7000 Accounts Receivable 20000 Receivable from Popular Creek 5000 Inventory 25000 Plant and Equipment 100000 Accumulated Depreciation 10000 Accounts Payable 12000 Bonds Payable 50000 Common Stock 60000 Sales 150000 Cost of goods sold 70000 Depreciation Expense 10000 Operating Expense 30000 Dividend paid 15000 Total SFr282,000 SFr 282,000 Additional Information The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $4,000 payable to RoadTime. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1. Equipment is depreciated by the straight-line method with a 10-year life and no residual value. A full year's depreciation is taken in the year of acquisition. The equipment was acquired on March 1. The dividends were declared and paid on November 1. Exchange rates were as follows: January 1 1SFr=$.73 March 1 1SFr=$.74 November 1 1SFr=$.77 December 31 1SFr=$.80 20X1 Average 1SFr=$.75 The Swiss franc is the functional currency. Required (a) Prepare a schedule translating the December 31, 20X1, trial balance from Swiss francs to dollars. (b) Where is the translation adjustment reported on Popular Creek's consolidated financial statements and its foreign subsidiary?

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter3: The Basics Of Record Keeping And Financial Statement Preparation: Income Statement

Section: Chapter Questions

Problem 18E

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On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 60,000. RoadTime's December 31, 20X1, Trial balance in SFr is as follows:

	Debit (SFr)	Credit (SFr)
Cash	7000
Accounts Receivable	20000
Receivable from Popular Creek	5000
Inventory	25000
Plant and Equipment	100000
Accumulated Depreciation		10000
Accounts Payable		12000
Bonds Payable		50000
Common Stock		60000
Sales		150000
Cost of goods sold	70000
Depreciation Expense	10000
Operating Expense	30000
Dividend paid	15000
Total	SFr282,000	SFr 282,000

Additional Information

The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $4,000 payable to RoadTime.
Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1.
Equipment is depreciated by the straight-line method with a 10-year life and no residual value. A full year's depreciation is taken in the year of acquisition. The equipment was acquired on March 1.
The dividends were declared and paid on November 1.
Exchange rates were as follows:

January 1	1SFr=$.73
March 1	1SFr=$.74
November 1	1SFr=$.77
December 31	1SFr=$.80
20X1 Average	1SFr=$.75

The Swiss franc is the functional currency.

Required

(a) Prepare a schedule translating the December 31, 20X1, trial balance from Swiss francs to dollars.

(b) Where is the translation adjustment reported on Popular Creek's consolidated financial statements and its foreign subsidiary?

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