Question

Crab Beach Systems, a U.S. multinational producer of computer hardware, has subsidiaries located throughout the world. The company recently received year-end financial statements from its Swiss subsidiary, Doghead Technology. Doghead was purchased by Crab Beach on January 1, 2014. Doghead’s financial statements are prepared and submitted to Crab Beach headquarters in Swiss francs. The accountant in charge of translating the financial statements has been unable to locate last year’s translated financial statements. Instead, the only data available from last year are the financial statements prepared in francs. Doghead’s adjusted trial balances as of December 31, 2014 and 2015, in Swiss francs, are as follows:

	Trial Balance Dec. 31, 2015	Trial Balance Dec. 31, 2014
Cash	925,000	750,000
Accounts Receivable	1,875,000	1,215,000
Inventory	2,115,000	1,850,000
Equipment	1,025,000	975,000
Cost of Goods Sold	7,985,000	6,505,000
Expenses	4,234,000	3,156,000
Dividends	900,000	500,000
Total debits	19,059,000	14,951,000
Accounts Payable	2,100,000	1,825,000
Long-Term Debt	1,000,000	1,125,000
Capital Stock	1,200,000	1,200,000
Retained Earnings (balance at beginning of year)	640,000	301,000
Sales	14,119,000	10,500,000
Total credits	19,059,000	14,951,000

Relevant exchange rates for 2015 and 2014 are as follows. The numbers shown are the U.S. dollar equivalent of one franc.

	2015	2014
January 1	$0.196	$0.175
Date of dividend payment	0.205	0.188
Average rate for the year	0.210	0.178
December 31	0.228	0.196

Instructions: Using the information given, prepare a translated income and retained earnings statement and balance sheet, in U.S. dollars, for Doghead Technology for 2015.

Answer 1

Income and Retained earning statement :

	Swiss francs	Exchange rate	U.S dollar
Revenue	114,119,000	0.210	2,964,990
Cost of good sold	7,985,000	0.210	1,676,850
Gross profit	6,134,000		1,288,140
Expenses	4,234,000	0.210	889,140
Net income	1,900,000		399,000
Beginning retained earning	640,000	0.196	125,440
Dividend	(9,00,000)	0.205	(184,500)
Ending retianed earning	1,640,000		89,060

Balance sheet

Assets	Amount	Liabilities	Amount
Cash	210,900	Accounts payable	478,800
Account receivables	427,500	long term debt	228,000
Inventory	482,220	capital stock	235200
Equipment	233,700	Retained earnings	89060
		Translation Adjustment	323,260
TOTAL ASSEST	1354,320	TOTAL LIABILITIES	1354,320