92. On
January 1, 2002, Fandu Corp. started a foreign subsidiary. On April 1, 2004, the subsidiary purchased
inventory costing 150,000 stickles.
One-fourth of this inventory remained unsold at the end of 2004 while
40% of the liability from the purchase had not yet been paid. The pertinent exchange rates were:
|
January 1, 2004 |
$1 = §3.0 |
|
April 1, 2004 |
$1 = §3.4 |
|
Average for 2004 |
$1 = §3.2 |
|
December 31, 2004 |
$1 = §3.6 |
Required:
What should have been the December 31,
2004 inventory and accounts payable balances for this foreign
subsidiary as translated into U.S. dollars?
93. On
January 1, 2004, Veldon Co., a U.S. corporation with the U.S. dollar as its functional
currency, established Malont Co. as a subsidiary. Malont is located in the country of Sorania,
and its functional currency is the stickle. Malont engaged in the following transactions
during 2004:
|
January 1, 2004 |
Issued common stock for §500,000 |
||
|
July 14, 2004 |
Sold equipment at a loss of §40,000 |
||
|
October 1, 2004 |
Paid dividends of §60,000 |
||
|
Malont’s |
|||
|
January 1, 2004 |
$1 = §2.5 |
||
|
July 14, 2004 |
$1 = §2.1 |
||
|
October 1, 2004 |
$1 = §2.6 |
||
|
December 31, 2004 |
$1 = §2.7 |
||
|
Average for 2004 |
$1 = §2.4 |
||
Required:
Calculate the translation
adjustment for Malont.
Use
the following to answer questions 94-97:
Ginvold
Co. began operating a subsidiary in a foreign country on January 1, 2004 by
acquiring all of the common stock for §50,000.
This subsidiary immediately borrowed §120,000 on a five-year note with
ten percent interest payable annually beginning on January 1, 2005. A building was then purchased for
§170,000. This property had a ten-year
anticipated life and no salvage value and was to be depreciated using the
straight-line method. The building was
rented for three years to a group of local doctors for §6,000 per month. By year-end, payments totaling §60,000 had
been made. On October 1, §5,000 were
paid for a repair made on that date. A
cash dividend of §6,000 was transferred back to Ginvold on December 31,
2004. The functional currency for
the subsidiary was the stickle. Currency
exchange rates were as follows:
|
January 1, 2004 |
$2.40 = §1 |
|
October 1, 2004 |
$2.22 = §1 |
|
Average for 2004 |
$2.28 = §1 |
|
December 31, 2004 |
$2.16 = §1 |
94. Required:
Prepare an income statement for
this subsidiary in stickles and then translate these amounts into U.S. dollars.
95. Required:
Prepare a statement of retained
earnings for this subsidiary in stickles and then translate these amounts
into U.S. dollars.
96. Required:
Prepare a balance sheet for
this subsidiary in stickles and then translate these amounts into U.S. dollars.
