Question

Watson Company has a subsidiary in the country of Alonza where the local currency unit is the kamel (KM). On December 31, 2014, the subsidiary has the following balance sheet: Cash Inventory Land Building Accumulated depreciation KM 14,000 Notes payable (due 2016) KM 29,500 24,500 Common stock 24,000 7,000 Retained earnings 12,000 40,000 (20,000) KM 65,500 KM 65,500 The subsidiary acquired the inventory on August 1, 2014, and the land and buildings in 2000. It issued the common stock in 1998. During 2015, the following transactions took place: 2015 Feb. 1 Paid 17,000 KM on the note payable. May 1 Sold entire inventory for 33,000 KM on account. June 1 Sold land for 8,400 KM cash. Aug. 1 Collected all accounts receivable. Sept. 1 Signed long-term note to receive 11,500 KM cash. Oct. 1 Bought inventory for 15,000 KM cash. Nov. 1 Bought land for 7,000 KM on account. Dec. 1 Declared and paid 2,200 KM cash dividend to parent. Dec. 31 Recorded depreciation for the entire year of 2,000 KM. The exchange rates for 1 KM are as follows: 1998 2000 August 1, 2014 December 31, 2014 February 1, 2015 May 1, 2015 June 1, 2015 August 1, 2015 September 1, 2015 October 1, 2015 November 1, 2015 December 1, 2015 1 KM 1 1 1 1 1 1 IIIIIIIIIIIIIIIIIIIIIIII $0.24 0.21 0.31 0.32 0.33 0.34 0.35 0.37 0.38 0.39 0.40 0.41 1 1 1

Answer 1

Balance Sheet of Subsidiary as on 31.12.2014
Assets	Amount	Liabilities	Amount
Cash	14,000	Notes Payable	29,500
Inventory	24,500	Common Stock	24,000
Land	7,000	Retained Earning	12,000
Building	40,000
Accumulated Depreciation	(20,000)
TOTAL	65,500	TOTAL	65,500
Balance Sheet of Subsidiary as on 31.12.2015 in KM
Assets	Amount	Liabilities	Amount
Cash	32,700	Note Payable 1	12,500
Accounts Receivable	-	Note Payable 2	11,500
Inventory	15,000	Common Stock	24,000
Land	7,000	Retained Earning	17,700
Building	40,000	Accounts Payable	7,000
Accumulated Depreciation	(22,000)
TOTAL	72,700	TOTAL	72,700
Balance Sheet of Subsidiary as on 31.12.2015 in $
Assets	Amount	Liabilities	Amount
Cash	13,734	Note Payable 1	5,250
Inventory	6,300	Note Payable 2	4,830
Land	2,800	Common Stock	5,760
Building	8,400	Retained Earning	7,834
Accumulated Depreciation	(4,620)	Accounts Payable	2,940
TOTAL	26,614	TOTAL	26,614

Remeasurement gain is 400 $ included in Retained Earnings.