Question

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On January 1, 20X1. Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 69,000. SunTime's December 31, 20X1. trial balance in SFr is as follows: Credit Debit SFr 8, 200 22, See 6. 209 28,500 185, ees Cash Accounts Receivable (net) Receivable from Popular Creek Inventory Plant & Equipment Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Sales Cost of Goods Sold Depreciation Expense Operating Expense Dividends Paid Total SFr 10,300 12,400 51, eee 69, eee 157,800 71, 809 10,300 32,800 16,800 SFr 380,500 SE380.se Additional Information 1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $5,200 payable to SunTime. 2. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1. 3. Equipment is depreciated by the straight-line method with a 10-year life and no residual value. A full year's depreciation is taken in the year of acquisition. The equipment was acquired on March 1. 4. The dividends were declared and paid on November 1. 5. Exchange rates were as follows: January 1 March 1 November 1 December 31 29x1 average SFF $ 1=0.73 1 = 0.74 1 = 0.77 1 = 0.89 10.75 6. The Swiss franc is the functional currency. Required: a. Prepare a proof of the translation adjustment. POPULAR CREEK CORPORATION AND SUBSIDIARY Proof of Translation Adjustment Year Ended December 31, 20X1 U.S Dollars Net assets at beginning of year Adjustment for changes in net asset position during year. Net income for year Dividends paid Net assets translated at: Rates during year Rates at end of year Change in other comprehensive income translation adjustment during year net increase Accumulated other comprehensive income translation adjustment January 1 Change in other comprehensive income translation adjustment December 31

Answer 1

Popular Creek Corporation and Subsidiary Proof of Translation Adjustment Year Ended December 31, 20X1
	U.S. Dollars
Net assets at beginning of year	$50370
Adjustment for changes in net asset position during year:
Net income for year	33375
Dividends paid	(12936)
Net assets translated at:
Rates during year	70809
Rates at end of year	77360
Change in other comprehensive income translation adjustment during year net increase	6551
Accumulated other comprehensive income translation adjustment January 1	0
Change in other comprehensive income translation adjustment December 31	$6551

Popular Creek Corporation and Subsidiary Proof of Translation Adjustment Year Ended December 31, 20X1
	SFr	Translation rate	U.S. Dollars
Net assets at beginning of year	69000	0.73	50370
Adjustment for changes in net asset position during year:
Net income for year	44500	0.75	33375
Dividends paid	(16800)	0.77	(12936)
Net assets translated at:
Rates during year			70809
Rates at end of year	96700	0.80	77360
Change in other comprehensive income - translation adjustment during year - net increase			6551
Accumulated other comprehensive income — translation adjustment — January 1			0
Change in other comprehensive income — translation adjustment December 31 (credit)			6551

Net income = sales – cost of goods sold – depreciation expense – operating expense = 157800-71000-10300-32000 = 44500