Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN: 9781285595047
Author: Weil
Publisher: Cengage
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Transcribed Image Text:On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment
cost of Swiss francs (SF) 73,000. SunTime's December 31, 20X1, trial balance in SFr is as follows:
Cash
Accounts Receivable (net)
Receivable from Popular Creek
Inventory
Plant and Equipment
Accumulated Depreciation
Accounts Payable
Bonds Payable
Common Stock
Sales
Cost of Goods Sold
Depreciation Expense
Operating Expense
Dividends Paid
Total
Additional Information
Debit
SFr 8,700
Credit
21,500
6,500
27,500
102,000
Sfr 10,500
13,100
53,500
73,000
147,200
73,500
10,500
31,500
15,600
SFP 297,300
SFP 297,300
=
1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $5,500 payable to SunTime.
2. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1
3. 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
4. The dividends were declared and paid on November 1.
5. Exchange rates were as follows:
January 1
March 1
November 1
December 31
28x1 average
SFr 1
$0.73
Sfr 1 $ 0.74
SFr 1 5 8.77
SFr 1-5 0.80
SFr 1
$0.75
6. The Swiss franc is the functional currency
Required:
a. Prepare a proof of the translation adjustment
b. Where is the translation adjustment reported on Popular Creek's consolidated financial statements and its foreign subsidiary
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