CC 401 Chapter 8 Quiz

Ginvold Co. began operating a subsidiary in a foreign country on January 1, 00! by ac"uiring
all
of the co##on stoc$ for %&0,000. 'his subsidiary i##ediately borro(ed %10,000 on a )ve*
year
note (ith ten percent interest payable annually beginning on January 1, 008. + building (as
then
purchased for %1!0,000. 'his property had a ten*year anticipated life and no salvage value
and
(as to be depreciated using the straight*line #ethod. 'he building (as rented for three years
to a
group of local doctors for %,,000 per #onth. -y year*end, pay#ents totaling %,0,000 had been
#ade. .n .ctober 1, %&,000 (as paid for a repair #ade on that date. + cash dividend of
%,,000
(as transferred bac$ to Ginvold on /ece#ber 01, 00!. 'he functional currency for the
subsidiary
(as the stic$le. Currency e1change rates (ere as follo(s2
%1 3
January 1, 00! 4.40
.ctober 1, 00! 4.
/ece#ber 01, 00! 4.1,
00! +verage 4.8
5+6' +
7tic$les 6ate /ollars
8nco#e
6ent revenue !,000
8nterest e1pense 91,000:
/epreciation e1pense 91!,000:
6epair e1pense 9&,000:
;et inco#e 08,000
6etained <arnings
-eginning 0
;et inco#e 08,000
/ividend 9,,000:
<nding 0,000
-alance 7heet
Cash 4=,000
+ccounts receivable 1,000
-uilding 1!0,000
+ccu#ulated depreciation 91!,000:
'otal assets 14,000
8nterest payable 1,000
;ote payable 10,000
Co##on stoc$ &0,000
6etained earnings 0,000
'ranslation ad>ust#ent
'otal liabilities and e"uities 14,000
6e"uired2
+. 'ranslate the )nancial state#ents above.
-. 8f the functional currency (as dollars 94:, reco#pute the )nancial state#ents.
5+6' -
7tic$les 6ate /ollars
8nco#e
6ent revenue !,000
8nterest e1pense 91,000:
/epreciation e1pense 91!,000:
6epair e1pense 9&,000:
6e#easure#ent gain
;et inco#e 08,000
6etained <arnings
-eginning 0
;et inco#e 08,000
/ividend 9,,000:
<nding 0,000
-alance 7heet
Cash 4=,000
+ccounts receivable 1,000
-uilding 1!0,000
+ccu#ulated depreciation 91!,000:
'otal assets 14,000
8nterest payable 1,000
;ote payable 10,000
Co##on stoc$ &0,000
6etained earnings 0,000
'ranslation ad>ust#ent
'otal liabilities and e"uities 14,000