Sullivan’s Island Company began operating a subsidiary in a foreign country on January 1, 2017, by investing capital in the amount of 60,000 pounds. The subsidiary immediately borrowed 140,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2018. The subsidiary then purchased for 200,000 pounds a building that had a 10-year expected life and no salvage value and is to be
January 1, 2017 | $2.00 = 1 pound |
October 1, 2017 | 2.05 = 1 |
December 31, 2017 | 2.08 = 1 |
Average for 2017 | 2.04 = 1 |
Prepare an income statement, statement of
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Chapter 10 Solutions
ADVANCED ACCOUNTING-LL
- Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2017, by investing capital in the amount of 59,000 pounds. The subsidiary immediately borrowed 139,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2018. The subsidiary then purchased for 198,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2017, the subsidiary rented the building for three years to a group of local attorneys for 8,500 pounds per month. By year-end, rent payments totaling 85,000 pounds had been received, and 17,000 pounds was in accounts receivable. On October 1, 4,400 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,400 pounds back to Sullivan's Island Company on December 31, 2017. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound follow:…arrow_forwardSullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 73,000 pounds. The subsidiary immediately borrowed 146,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 219,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,100 pounds per month. By year-end, rent payments totaling 81,000 pounds had been received, and 16,200 pounds was in accounts receivable. On October 1, 2020, 3,000 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,200 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…arrow_forwardSullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 69,000 pounds. The subsidiary immediately borrowed 146,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 215,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 4,200 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…arrow_forward
- Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 68,000 pounds. The subsidiary immediately borrowed 160,000 pounds on a five-year note with 8 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 228,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 2,800 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…arrow_forwardSullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 68,000 pounds. The subsidiary immediately borrowed 160,000 pounds on a five-year note with 8 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 228,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 2,800 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…arrow_forwardSullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 68,000 pounds. The subsidiary immediately borrowed 160,000 pounds on a five-year note with 8 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 228,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 2,800 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…arrow_forward
- Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 80,000 pounds. The subsidiary immediately borrowed 190,000 pounds on a five-year note with 8 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 270,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,500 pounds per month. By year-end, rent payments totaling 85,000 pounds had been received, and 17,000 pounds was in accounts receivable. On October 1, 2020, 3,400 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,750 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…arrow_forwardSullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 94,000 pounds. The subsidiary immediately borrowed 225,000 pounds on a five-year note with 9 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 319,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,850 pounds per month. By year-end, rent payments totaling 88,500 pounds had been received, and 17,700 pounds was in accounts receivable. On October 1, 2020, 4,100 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,575 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…arrow_forwardSullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2024, by investing capital in the amount of 78,000 pounds. The subsidiary immediately borrowed 185,000 pounds on a five-year note with 7 percent interest payable annually beginning on January 1, 2025. The subsidiary then purchased for 263,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2024, the subsidiary rented the building for three years to a group of local attorneys for 8,450 pounds per month. By year-end, rent payments totaling 84,500 pounds had been received, and 16,900 pounds was in accounts receivable. On October 1, 2024, 3,300 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,775 pounds back to Sullivan's Island Company on December 31, 2024. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…arrow_forward
- Llungby AB spent 1,000,000 krone in 2017 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product is brought to market in January 2018 and is expected to generate sales revenue for five years. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: Prepare journal entries for development costs for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP.arrow_forwardCharles Edward Company established a subsidiary in a foreign country on January 1, 2017, by investing FC 3,200,000 when the exchange rate was $0.50/FC. Charles Edward negotiated a bank loan of FC 3,000,000 on January 5, 2017, and purchased plant and equipment in the amount of FC 6,000,000 on January 8, 2017. It depreciated plant and equipment on a straight-line basis over a 10-year useful life. It purchased its beginning inventory of FC 1,000,000 on January 10, 2017, and acquired additional inventory of FC 4,000,000 at three points in time during the year at an average exchange rate of $0.43/FC. It uses the first-in, first-out (FIFO) method to determine cost of goods sold. Additional exchange rates per FC 1 during the year 2017 follow: January 1–31, 2017 $0.50 Average 2017 0.45 December 31, 2017 0.38 The foreign subsidiary’s income statement for 2017 and balance sheet at December 31, 2017, follow: INCOME STATEMENTFor the Year Ended December 31, 2017FC (in…arrow_forwardLlungby AB spent 1,000,000 krone in 2020 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product is brought to market in January 2021 and is expected to generate sales revenue for five years. Assume that Llungby AB is a foreign company using IFRS and is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: Prepare journal entries for development costs for the years ending December 31, 2020, and December 31, 2021, under (1) IFRS and (2) U.S. GAAP. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2020, and December 31, 2021, conversion worksheets to convert IFRS balances to U.S. GAAP.arrow_forward
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