Translation:it is the most common method used and is applied when the local currency is the foreign entity’s functional currency. The subsidiary statement must be translated from its local currency to the parents’ functional currency. To translate the financial statements, the company will use the current rate, which is the exchange rate on balance sheet date, to convert the local currency. Because revenues and expenses are assumed to occur uniformly over the period, revenues and expenses on the income statement are translated using the average rate for the reporting period. Any translation adjustment that occurs is a component of comprehensive income. The method used to translate financial statement from the local currency to functional currency is called current rate method.
Preparation of schedule transacting the December 31, 20X1
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ADVANCED FINANCIAL ACCOUNTING IA
- 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…arrow_forwardOn January 1, 20X1, Himalaya Corporation organized Alps Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 120,000. Alps's December 31, 20X1, trial balance in SFr is as follows: Debit (SFr) Credit(SFr) Cash 14000 Accounts Receivable 40000 Receivable from Himalaya 10000 Inventory 50000 Plant and Equipment 200000 Accumulated Depreciation 20000 Accounts Payable 24000 Bonds Payable 100000 Common Stock 120000 Sales 300000 Cost of goods sold 140000 Depreciation Expense 20000 Operating Expense 60000 Dividend paid 30000 Total SFr564,000 SFr 564,000 Additional Information The receivable from Himalaya is denominated in Swiss francs. Himalaya's books show a $8,000 payable to Alps. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased…arrow_forwardPlease help me to solve this question step by step very carefully 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…arrow_forward
- ABC Company sold Euro 80 of goods to XYZ Company on credit on May 1. Terms were 20/5, n/60. PART A The accounting period of the company coincides with the calendar year. In this section, please assume XYZ paid the balance due on May 4. In light of this, net sales reported on ABC's income statement are Euro...... Place your answer here: PART B In this section, please assume XYZ returned on May 2, Euro 5 of defective goods, and then paid the outstanding balance due on May 16. In light of this, net sales reported on ABC's income statement are Euro... Place your answer here:arrow_forwardOn November 15 20x1,. Lemon co. ordered merchandise, on an FOB shiping point term, from a foreign entity for 200,000 marks. The merchandise was shipped and invoiced to Lemon on December 10 20x1. Lemon paid the invoice on January 10, 20x2. The spot rates are as follows: Nov. 15, 20x1 P22.4955 December 10, 20x1 P22.4875 December 31, 20x1 P22.4675 January 10, 20x2 P22.4475 Requirement: Provide the journal entries in 20x1 and 20x2arrow_forwardHayao Co. purchases inventory from overseas and incurs the following costs: the cost of the merchandise is $50,000 with the credit terms of 2/10, n/30; FOB shipping point freight charges are $1,500; insurance during transit is $500; and import duties are $1,000. Hayao paid within the discount period and incurred additional costs of $1,200 for advertising, $5,000 for sales commissions and $500 for delivery of goods to the customers. Compute the cost that should be assigned to the inventory.arrow_forward
- 1-Assume that our subsidiary’s income statement in Euros (€) is reported as follows for the year: Income statement: In Euros (€) Sales 2,500,000 Cost of goods sold (1,600,000) Gross Profit 900,000 Operating expenses (540,000) Net income 360,000 Also assume the following exchange rates: $ / € BOY Rate $1.30 EOY rate $1.40 Avg. rate $1.35 Required: Translate the income statement into $US using the current-rate method.arrow_forwardXYZ, CO., placed an order for inventory costing 9,000,000 Euro with a foreign vendor on May 15 whenthe spot rate was 1 Euro = $1.165. XYZ received the goods on June 1 when the spot rate was 1 Euro =$1.173. Also on June 1, XYZ entered into a 90-day forward contract to purchase 9,000,000 Euro at aforward rate of 1 Euro = $1.182. Payment was made to the foreign vendor on September 1 when thespot rate was 1 Euro= $1.20. XYZ has a June 30 year-end. On that date, the spot rate was 1 Euro =$1.18, and the forward rate on the contract was 1 Euro= $1.187. Changes in the current value of theforward contract is measured as the present value of the changes in the forward rates over time and noseparate accounting is given the time value of the contract. The relevant discount rate is 6%. Prepare all relevant journal entries suggested by the above facts assuming that the hedge is designatedas a fair value hedge.arrow_forwardCASE 1. The Philippine corporation purchased merchandise from a US firm for USD$15,000 on November 1, 2021. Also on the same date the Philippine corporation sold merchandise to a US firm for USD$30,000. The following rates were available: Buying Rate Selling Rate November 1, 2021 US$1 = P46.00 P1 = $.021505 December 31, 2021 US$1 = P45.80 P1 = $.021277 January 31, 2022 US$1 = P46.20 P1 = $.022222 What is the amount of sales revenue recognized for the year end 2021?1,380,0001,395,0001,374,0001,410,000 2. What is the carrying amount of the accounts receivable on December 31, 2021? 1,410,000 1,374,000 1,386,000 1,350,000 3. What is the carrying amount of the accounts payable on December 31, 2021? 687,000 705,000 693,000 675,000 4. What is the total/net foreign currency gain/(loss) for the year 2021? 12,000 gain 12,000 loss 13,500 gain 13,500 lossarrow_forward
- Agentel Corporation is a U.S.-based importing-exporting company. The company entered into the following transactions during the month of November. Nov. 6 Purchased merchandise from AGT, a Swiss firm, for 540,000 francs. 5 Sold merchandise to SLS, Inc., a firm located in Rio De Janeiro, for $200,000. 18 Sold merchandise to TNT, Ltd., a British firm, for 140,000 pounds. 20 Purchased merchandise from SDS, Ltd., a British firm, for $170,000. All the transactions were unsettled at December 31, Agentel’s fiscal year-end. Spot rates are as follows: Currency Date Franc Real Pound November 6 $0.490 $0.412 $1.520 November 15 0.487 0.409 1.509 November 18 0.476 0.414 1.506 November 20 0.468 0.405 1.498 December 31 0.460 0.398 1.482 (a) Your answer is correct. Compute the amount that Agentel would report for each unsettled receivable…arrow_forwardAgentel Corporation is a U.S.-based importing-exporting company. The company entered into the following transactions during the month of November. Nov. 6 Purchased merchandise from AGT, a Swiss firm, for 540,000 francs. 5 Sold merchandise to SLS, Inc., a firm located in Rio De Janeiro, for $200,000. 18 Sold merchandise to TNT, Ltd., a British firm, for 140,000 pounds. 20 Purchased merchandise from SDS, Ltd., a British firm, for $170,000. All the transactions were unsettled at December 31, Agentel’s fiscal year-end. Spot rates are as follows: Currency Date Franc Real Pound November 6 $0.490 $0.412 $1.520 November 15 0.487 0.409 1.509 November 18 0.476 0.414 1.506 November 20 0.468 0.405 1.498 December 31 0.460 0.398 1.482 (a) Compute the amount that Agentel would report for each unsettled receivable and payable in its balance sheet prepared…arrow_forwardLivingston Company is a wholly-owned subsidiary of Rose Corporation. Livingston operates in a foreign country with financial statements recorded in pounds (P), the company's functional currency. Financial statements for the year 2024 are as follows: Sales Income Statement For Year Ending December 31, 2024 Cost of goods sold Gross profit Less: Operating expenses Gain on sale of equipment Net income Statement of Retained Earnings P 270,000 (155,000) 115,000 (54,000) 10,000 P 71,000 For Year Ending December 31, 2024 Retained earnings, 1/1/24 Net income Less: Dividends Retained earnings, 12/31/24 P 216,000 71,000 (26,000) P 261,000 Balance Sheet December 31, 2024 Assets Cash Receivables Inventory Property, plant, and equipment (net) Total assets Liabilities and Equities Liabilities Common stock Retained earnings, 12/31/24 Total liabilities and equities Additional Information P 44,000 116,000 58,000 339,000 P 557,000 P 176,000 120,000 261,000 P 557,000 • The common stock was issued in 2017…arrow_forward
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage