Adv accounting unit 7
For this assignment, use your Fundamentals of Advanced Accounting text and the Excel spreadsheet provided on the companion website (linked in Resources) to complete the following:
· Problem 33 on page 431. This problem tests your knowledge of converting foreign currency financial statements to U.S. dollars. In the spreadsheet, use tab P08-33 for your answers.
33. Livingston Company is a wholly owned subsidiary of Rose Corporation. Livingston operates in a foreign country with financial statements recorded in goghs (GH), the company’s functional currency. Financial statements for the year 2017 are as follows:
|
Income Statement For Year Ending December 31, 2017 |
|
|
Sales |
GH 270,000 |
|
Cost of goods sold |
(155,000) |
|
Gross profit |
115,000 |
|
Less: Operating expenses |
(54,000) |
|
Gain on sale of equipment |
10,000 |
|
Net income |
GH 71,000 |
|
Statement of Retained Earnings For Year Ending December 31, 2017 |
|
|
Retained earnings, 1/1/17 |
GH 216,000 |
|
Net income |
71,000 |
|
Less: Dividends |
(26,000) |
|
Retained earnings, 12/31/17 |
GH 261,000 |
|
Balance Sheet December 31, 2017 |
|
|
Assets |
|
|
Cash |
GH 44,000 |
|
Receivables |
116,000 |
|
Inventory |
58,000 |
|
Property, plant and equipment (net) |
339,000 |
|
Total assets |
GH 557,000 |
|
Liabilities and Equities |
|
|
Liabilities |
GH 176,000 |
|
Common stock |
120,000 |
|
Retained earnings, 12/31/17 |
261,000 |
|
Total liabilities and equities |
GH 557,000 |
Additional Information
· The common stock was issued in 2010 when the exchange rate was $2.08 per GH; property, plant, and equipment was acquired in 2011 when the rate was $2.00 per GH.
· As of January 1, 2017, the retained earnings balance was translated as $396,520.
· The U.S.$ per GH exchange rates for 2017 follow:
|
January 1 $1.67 April 1 1.61 September 1 1.72 December 31 1.54 Weighted average 1.59 |
$1.67 |
|
· Inventory was acquired evenly throughout the year. · The December 31, 2016, balance sheet reported a translation adjustment with a debit balance of $85,000. · Dividends were declared on April 1, 2017, and a piece of equipment was sold on September 1, 2017. Assume that the gogh is Livingston Company’s functional currency. Translate the 2017 foreign currency financial statements into the parent’s reporting currency, the U.S. dollar.
|
1.61 |
|
|
1.72 |
|
|
1.54 |
|
|
1.59 |