Question

On January 1,20X1, Giant Corporation organized Tiny Company as a subsidiary in Switzerland with an initial investment cost of francs(SFr)120,000.Tiny’s December 31;20X1,trial balance in SFr is as follows, Debit(SFr) Credit(SFr) Cash 14000 Accounts receivable 40000 Inventory 50000 Plant and equipment 200000 Receivable from giant 10000 Accumulate depreciation 20000 Accounts payable 24000 Bound payable 100000 Common stock 120000 Sale 300000 cost of goods sold 140000 Depreciation expense 20000 Operating expense 60000 Dividend paid 30000 Total SFr564,000 SFr 564000 Additional information 1. The receivable from Giant denominated in swiss francs. Giant’s books show a $8000 payable to tiny. 2. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1. 3. Equipment is depreciated by the straight – line method with a 10 years life and no residual value. A full year’s depreciation is taken in the year of acquisition. The equipment was acquired on march1. 4. The dividend were declared and paid on november1. 5. Exchange rate were follows: January1 1SFr=$.73 March1 1SFr=$.74 November1 1SFr=$.77 December31 1SFr=$.80 20X1 average 1SFr=$.75 6. The swiss franc is the functional currency. Required. (a) Prepare a schedule translating the December31, 20X1, trial balance from swiss francs to dollars.

Answer 1

					Exchange Rate
					Jan-01	1SFR= $.73
					Mar-01	1SFR= $.74
					Nov-01	1SFR= $.77
					Dec-31	1SFR= $.80
	(SFR)				2001 Average	1SFR= $.75
Initial Investment			Exchange Rate
01-01-2001	120000		0.73	Date of acquisition
Trial Balance 31-12-2001	Dr	Cr
Cash	14000		0.8	Closing Rate	11200
Acccount Receivable	32000	(Excluding 8000)	0.8	Closing Rate	25600
Inventory	50000		0.8	Closing Rate	40000
Plant and Equipment	200000		0.74	Date of acquisition	148000
Receivable from giant	10000		0.8	Closing Rate	8000
Accumulated Depreciation		20000	0.74	Date of acquisition		14800
Account Payable		24000	0.8	Closing Rate		19200
Bond Payable		100000	0.8	Closing Rate		80000
Common Stock		120000	0.73	Date of acquisition of Tiny		87600
Sales	(Excluding 8000)	292000	0.75	Average Rate		219000
Cost of goods sold	140000		0.75	Average Rate	105000
Depreciation	20000		0.74	Date of acquisition	14800
Operating Expense	60000		0.75	Average Rate	45000
Dividend	30000		0.77	Date of payment of dividend	23100
				Exchange Difference Reserve		100	(balancing figure)
Total	556000	556000		Total	420700	420700