Question

The Isle of Palms Company (IOP), a U.S.-based entity, has a wholly owned subsidiary in Israel that has been determined as having the Israeli shekel (ILS) as its functional currency. On October 1, 2016, the Israeli subsidiary borrowed 500,000 Swiss francs (CHF) from a bank in Geneva for two years at an interest rate of 5 percent per year. The note payable and accrued interest are payable at the date of maturity. On December 31, 2017, the Israeli subsidiary has the following foreign currency balances on its books:

Interest expense	CHF	$           25,000
Interest payable	CHF	$         31,250
Note payable	CHF	$       500,000

Relevant exchange rates between the Israeli shekel (ILS) and Swiss franc (CHF), and between the U.S. dollar (USD) and Israeli shekel (ILS) follow:

	ILS per CHF	USD per ILS
1-Oct-16	$                       3.86	$              0.30
1-Jan-17	$                       3.91	$              0.29
Average for 2017	$                       3.95	$              0.27
31-Dec-17	$                       4.02	$              0.25

1. Determine the Israeli shekel amounts at which the Swiss franc balances should be reported on the Israel subsidiary’s December 31, 2017, trial balance.

2. Determine the U.S. dollar amounts at which the Swiss franc balances should be included in IOP’s 2017 consolidated financial statements.

a	31-Dec-17	CHF	Exchange   Rate		ILS *
	Interest expense	$           25,000
	Interest Payable	$           31,250
	Note Payable	$         500,000
a	31-Dec-17	ILS	Exchange Rate		USD**
	Interest expense	$           98,750
	Interest Payable	$         125,625
	Note Payable	$     2,010,000

Answer 1

a	31-Dec-17	CHF	Exchange   Rate		ILS *
	Interest expense	$           25,000	3.95	A	$          98,750.00
	Interest Payable	$           31,250	4.02	C	$        125,625.00
	Note Payable	$         500,000	4.02	C	$    2,010,000.00
a	31-Dec-17	ILS	Exchange Rate		USD**
	Interest expense	$           98,750	0.27	A	$          26,662.50
	Interest Payable	$         125,625	0.25	C	$          31,406.25
	Note Payable	$     2,010,000	0.25	C	$        502,500.00