Question

Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2017, by investing capital in the amount of 74,000 pounds. The subsidiary immediately borrowed 175,000 pounds on a five-year note with 5 percent interest payable annually beginning on January 1, 2018. The subsidiary then purchased for 249,000 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 8,350 pounds per month. By year-end, rent payments totaling 83,500 pounds had been received, and 16,700 pounds was in accounts receivable. On October 1, 3,100 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,825 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: 1 Pound $2.70 January 1, 2017 October 1, 2017 December 31, 2017 = 2.75 = 2.88 1 2.78 1 Average for 2017 = Prepare an income statement, statement of retained earnings, and balance sheet for this subsidiary in pounds and then translate these amounts into U.S. dollars. Complete this question by entering your answers in the tabs below. Income Statement Retained Earnings Balance Sheet Prepare a Income Statement. (Amounts to be deducted should be indicated by a minus sign.) HH H

Answer 1

Please Note that for Balancesheet I had consider FX rate as 1 Pound= $2.88

Income Statement @ For the year ended 31/12/17 FX Rate = HUSD 2-78$= 1 pound particular Rent Revenue Interest expenses Depreciation exp. Repair exp. Pounds USD 1100, 200 $278,556 (8750 824325) (299ool (69222) (13100) (36918) - Net income 53450 1148591 statement of retain earnings. Pounds USD Partianlar Retain earnings 1/1 H) Net income - Dividend declared. 12/31 53450 111825) 198sal 1632873.5) 61 625 1157175 Retain earnings 12/31

Date Page Balance sheet as on 311121017 T A Pounds USD particular Assets Building (249000-24900) Account Receivable 224 100 16700 28096 Cash (83500 - 118258- 13100) 58575 168646 299375 862200 Total assets Ljabi j+y capital Borrowings Retain earnings Interest payables Total Liability for a 7 Gooo 213120 175000 so 6ooo G1625 119880 8750 25200 299375 862200