Problem

Foreign Currency Remeasurement [AICPA Adapted]On January 1, 20X1, Kiner Company formed a f...

Foreign Currency Remeasurement [AICPA Adapted]

On January 1, 20X1, Kiner Company formed a foreign subsidiary that issued all of its currently outstanding common stock on that date. Selected accounts from the balance sheets, all of which are shown in local currency units, are as follows:

	December 31
	20×2	20×1
Accounts Receivable (net of allowance for uncollectible
accounts of 2,200 LCU on December 31, 20×2, and
2,000 LCU on December 31, 20×1)	LCU 40,000	LCU 35,000
Inventories, at cost	80,000	75,000
Property, Plant, and Equipment (net of allowance for
accumulated depreciation of 31,000 LCU on December 31,
20×2, and 14,000 LCU on December 31, 20×1)	163,000	150,000
Long-Term Debt	100,000	120,000
Common Stock, authorized 10,000 shares, par value
10 LCU per share; issued and outstanding, 5,000 shares
on December 31, 20×2, and December 31, 20×1	50,000	50,000

Additional Information

1. Exchange rates are as follows:

January 1, 20X1-July 31, 20×1	2 LCU = $1
August 1, 20X1-0ctober 31, 20×1	1.8 LCU = 1
November 1, 20X1-June 30, 20×2	1.7 LCU = 1
July 1, 20X2-December 31, 20×2	1.5 LCU = 1
Average monthly rate for 20×1	1.9 LCU = 1
Average monthly rate for 20×2	1.6 LCU = 1

2. An analysis of the accounts receivable balance is as follows:

	20×2	20×1
Accounts Receivable:
Balance at beginning of year	LCU 37,000
Sales (36,000 LCU per month in 20×2 and 31,000 LCU
per month in 20×1)	432,000	LCU 372,000
Collections	(423,600)	(334,000)
Write-offs (May 20×2 and December 20×1)	(3,200)	(1,000)
Balance at end of year	LCU 42,200	LCU 37,000

	20×2	20×1
Allowance for Uncollectible Accounts:
Balance at beginning of year	LCU 2,000
Provision for uncollectible accounts	3,400	LCU 3,000
Write-offs (May 20×2 and December 20×1)	(3,200)	(1,000)
Balance at end of year	LCU 2,200	LCU 2,000

3. An analysis of inventories, for which the first-in, first-out inventory method is used, follows:

	20×2	20×1
Inventory at beginning of year	LCU 75,000
Purchases (June 20×2 and June 20×1)	335,000	LCU375,000
Goods available for sale	LCU410,000	LCU375,000
Inventory at end of year	(80,000)	(75,000)
Cost of goods sold	LCU330,000	LCU300,000

4. On January 1, 20X1, Kiner’s foreign subsidiary purchased land for 24,000 LCU and plant and equipment for 140,000 LCU. On July 4, 20X2, additional equipment was purchased for 30,000 LCU. Plant and equipment is being depreciated on a straight-line basis over a 10-year period, with no residual value. A full year’s depreciation is taken in the year of purchase.

5. On January 15, 20X1, 7 percent bonds with a face value of 120,000 LCU were issued. These bonds mature on January 15, 20X7, and the interest is paid semian-nually on July 15 and January 15. The first interest payment was made on July 15, 20X1.

Required

Prepare a schedule remeasuring the selected accounts into U.S. dollars for December 31, 20X1, and December 31, 20X2, respectively, assuming the U.S. dollar is the functional currency for the foreign subsidiary. The schedule should be prepared using the following form:

Item	Balance in LCU	Appropriate Exchange Rate	Remeasured into U.S. Dollars
December 31, 20×1:
Accounts Receivable (net)
Inventories
Property, Plant, and Equipment (net)
Long-Term Debt
Common Stock
December 31, 20×2:
Accounts Receivable (net)
Inventories
Property, Plant, and Equipment (net)
Long-Term Debt
Common Stock