Parent Corporation acquired foreign sub at book value on January 1, 2018. The purchase price was...
Parent Corporation acquired foreign sub at book value on January 1, 2018. The purchase price was 2,000,000 Euros at a time when the exchange rate was 1 Euro was equal to $1.12. The trial balance of Foreign sub as of December 31, 2018 is detailed below and relevant exchange rates are as follows. Euros is considered the functional currency.
Historical Rate 1/1/18 1.18
Current Rate 12/31/18 1.25
Average Rate 2018 1.195
Dividend Rate 1.23
Beginning Inventory 1/1/18 1.18
Ending Inventory 1.22
Trial Balance – Foreign Subsidiary
Debits
Cash 150,000
Accounts Receivable 180,000
Inventory 230,000
Land 250,000
Buildings 600,000
Equipment 800,000
Cost of Sales 200,000
Depreciation 100,000
Other Expenses 120,000
Dividends 100,000
Total 2.730,000
Credits
Accumulated depreciation 700,000
Accounts Payable 100,000
Short-Term Loan 230,000
Capital Stock 800,000
Retained Earnings, Jan 1 200,000
Sales 700,000
Total 2,730,000
REQUIRED
- Convert the foreign currency balance sheet to US Dollars
- What is the foreign currency gain or loss and where does it
Appear on the financial statements.
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