Question

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Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2017, by Investing capital in the amount of 73,000 pounds. The subsidiary Immediately borrowed 146,000 pounds on a five-year note with 10 percent Interest payable annually beginning on January 1, 2018. The subsidiary then purchased for 219,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2017, the subsidiary rented the building for three years to a group of local attorneys for 8,100 pounds per month. By year-end, rent payments totaling 81,000 pounds had been received, and 16,200 pounds was in accounts recevable. On October 1, 3,000 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,200 pounds back to Sullivan's Island Company on December 31, 2017. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound follow: January 1, 2017 October 1, 2017 December 31, 2017 Average for 2017 $ 3.99 = 3.95 = 3.98 = 3.94 1 Pound 1 1 1 Prepare a statement of cash flows In pounds for Sullivan's Island Company's foreign subsidiary and then translate these amounts Into U.S. dollars. (Round your exchange rate answers to 2 decimal places. Amounts to be deducted and cash outflows should be Indicated with minus sign.) Answer is not complete. U.S. Dollars 0 x 0 X xls (63,828) SULLIVAN'S ISLAND COMPANY Statement of Cash Flows Pounds Exchange Rate Operating Activities: Net income Add: Depreciation expenses 3.94 Less: Increase in accounts receivable (16,200) 3.94 Add: Increase in interest payable 3.94 $ 0 Cash flow from operating activities (16,200) Investing Activities: Purchase of building (219,000) 3.90 Cash flow from investing activities $ 210,000) Financing Activities: Capital contribution 73.000 $ 3.90 Borrowing on note 146.000 3.90 Dividends (13,200) 3.98 0 (63,828) (854,100) (854,100) ooo 284.700 589.400 (52,536) 205.800 801.564 Cash flow from financing activities Increase in cash Effect of exchange rate change on cash Beginning balance in cash Ending balance in cash Oo $ 0

Answer 1

Sullivan's Island Company Subsidiary Statement of Cash Flows
	POUNDS		U.S. Dollars
Net income	57700		227308
plus: depreciation (219000/10)	21900	3.94	86286
less: increase in accounts receivable	(16200)	3.94	(63828)
plus: increase in interest payable	14600	3.94	57524
Cash flow from operating activity	78000		307290
Investing Activities:
Purchase of building	(219000)	3.90	(854100)
cash flow from investing activity	(219000)		(854100)
Financing Activities:
Capital contribution	73000	3.90	284700
Borrowing on note	146000	3.90	569400
Dividends	(13200)	3.98	(52536)
Cash flow from Financing activity	205800		801564
Increase in cash	64800		254754
Effect of exchange rate change on cash	0		3150
beginning balance in cash	0		0
closing balance in cash	64800	3.98	257904

Sullivan's Island Company Subsidiary Income Statement
	POUNDS		U.S. Dollars
Rent revenue (8100*12)	97200	3.94	382968
Interest expense	-14600	3.94	-57524
Depreciation expense	-21900	3.94	-86286
Repair expense	-3000	3.95	-11850
Net income	57700		227308