Question

Kingsfield establishes a subsidiary operation in a foreign country on January 1,2017. The country’s currency is the kumquat (KQ). To start this business, kingsfield invests 10,000 kumquats. Of this amount, it spends 3,000 kumquats immediately to acquire equipment. Later, on April 1, 2017, it also purchases land. All subsidiary operational activites occur at an even rate throughout the year. The U.S. dollar($)exchange rate for the kumquat for 2017 follow: January 1 $1.71 April1 1.59 June 1 1.66 Weighted average 1.64 December31 1.62 As of December 31,2017, the subsidiary reports the following trial balance: debits credits Cash KQ8,000 Account receivable 9,000 Equipment 3,000 Accumulate depreciation KQ600 Land 5,000 Accounts payable 3,000 Notes payable (due2025) 5,000 Common stock 10,000 Dividends declared(1/06/17) 4,000 Sale 25,000 Salary expense 5,000 Depreciation expense 600 Miscellaneous expense 9,000 Total KQ43,600 KQ43,600 A corporation based in East Lansing, Michigan, kingsfield use the U.S. dollar as its reporting currency. (a) Assume that the subsidiary’s functional current the kumquat. Prepare a trial balance for it in U.S. dollars so that 2017 consolidated financial statement can be prepare. (b) Assume that the subsidiary’s functional currency is the U.S. dollar. Prepare a trial balance for it in U.S. dollars so that 2017 consolidated financial statements can be prepared.

Answer 1