Question

On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 62,000. RoadTime's December 31, 20X1, trial balance in SFr is as follows Debit SFr 8,500 22.000 6,900 26,000 109,000 Credit Cash Accounts Receivable (net) Receivable from Popular Creek Inventory Plant & Equipment Accumulated Depreciation Accounts Payable Bonds Payable Common Stock SFr 10,200 12,900 50,500 62,000 169,700 Sales Cost of Goods Sold 72,000 10,200 33,500 17,200 Depreciation Expense Operating Expense Dividends Paid Total SFr305,300 SFr305,300 Additional Information 1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $5,900 payable to RoadTime. 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: SFr $ 1 0.73 1 January 1 March 1 November 1 December 31 20X1 average = 0.74 0.77 1= 0.80 1 = 0.75 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 at end of year R Change in other comprehensive income translation adjustment during year net increase 0 Accumulated other comprehensive income translation adjustment January 1 Change in other comprehensive income translation adjustment December 31 0 b. Where is the translation adjustment reported on Popular Creek's consolidated financial statements and its foreign subsidiary? (Select all that apply.) Cash flow statement Statement of financial position Income statement Statement of comprehensive income Statement of retained earnings

Answer 1

Answer:

b.Translation adjustment should be reported on Income statement.

Popular Creek Corporation and Subsidiary Proof of Remeasurement Loss Year Ended Dec. 31, 20X1 Schedule 1 Statement of Net Monetary Position End of Year Beginning of Year Monetary Assets Cash SEr SFr 8,500 62,000 Accounts Rece ivable (net) SFr SFr 22,000 Receivables from Popular Creek SFr 6,900 SFr Total SFr 37,400 SFr 62.000 Less Monetary Liabilities: Accounts Payable Bonds Payable SFr 12,900 SEr SFr 50,500 SFr Total SFr -63,400 62,000 Net Monetary Assets SFr 26,000 Net Monetary Liabilities SFr Change in net monetary investment during 20X1 SFr -88,000 Schedule 2 SEr Rate U.S Dollars Exposed net monetary asset Position - January 1 SFr 62,000 0.73 45,260 Adjustment for changes in the net monetary position during the year Increases: From Operations: Sales 1,69,700 1,27,275 0.75 From other sources Decreases: From Operations: Purchases -98,000 0.75 -73,500 Cash Expenses 0.75 -33,500 -25,125 From dividends -17,200 0.77 -13,244 From purchase of plant and equipment -1,09,000 0.74 -80,660 Net monetary position prior to remeasurement at year-end rates -19,994 Exposed net monetary liability Position - December 31 SFr -26,000 0.80 -20.800 Remeasurement loss -806