Problem

Livingston Company is a wholly owned subsidiary of Rose Corporation. Livingston operates i...

Livingston Company is a wholly owned subsidiary of Rose Corporation. Livingston operates in a foreign country with financial statements recorded in goghs (GH), the company’s functional currency. Financial statements for the year of 2011 are as follows:

Income Statement

For Year Ending December 31, 2011

Sales

GH 270,000

Cost of goods sold

(155,000)

Gross profit

115,000

Less: Operating expenses

(54,000)

Gain on sale of equipment

10,000

   Net income

GH 71,000

Retained earnings, 1/1/11

GH 216,000

Net income

71,000

Less: Dividends paid

(26,000)

   Retained earnings, 12/31/11

GH 261,000

  

Balance Sheet December 31, 2011

Assets

 

Cash

GH 44,000

Receivables

116,000

Inventory

58,000

Fixed assets (net)

339,000

Total assets

GH 557,000

Liabilities and Equities

 

Liabilities

GH 176,000

Common stock

120,000

Retained earnings, 12/31/11

261,000

Total liabilities and equities

GH 557,000

Additional Information

• The common stock was issued in 2004 when the exchange rate was $1.00 = 0.48 GH; fixed assets were acquired in 2005 when the rate was $1.00 = 0.50 GH.

• As of January 1, 2011, the Retained Earnings balance was translated as $395,000.

• The currency exchange rates for $1 for the current year follow:

January 1, 2011

0.60

GH

April 1, 2011

0.62

 

September 1, 2011

0.58

 

December 31, 2011

0.65

 

Weighted average rate for 2011

0.63

 

• Inventory was acquired evenly throughout the year.

• The December 31, 2010, balance sheet reported a translation adjustment with a $85,000 debit balance.

• Dividends were paid on April 1, 2011, and a piece of equipment was sold on September 1, 2011.

Translate the foreign currency statements into the parent’s reporting currency, the U.S. dollar.

Step-by-Step Solution

Request Professional Solution

Request Solution!

We need at least 10 more requests to produce the solution.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the solution will be notified once they are available.
Add your Solution
Textbook Solutions and Answers Search