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.
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