Ginvold Co

question 54

Essay

Ginvold Co. began operating a subsidiary in a foreign country on January 1, 2021 by acquiring all of the common stock for §50,000 Stickles, the local currency. This subsidiary immediately borrowed §120,000 on a five-year note with ten percent interest payable annually beginning on January 1, 2022. A building was then purchased for §170,000 on January 1, 2021. This property had a ten-year anticipated life and no salvage value and was to be depreciated using the straight-line method. The building was immediately rented for three years to a group of local doctors for §6,000 per month. By year-end, payments totaling §60,000 had been received. On October 1, §5,000 were paid for a repair made on that date and it was the only transaction of this kind for the year. A cash dividend of §6,000 was transferred back to Ginvold on December 31, 2021. The functional currency for the subsidiary was the Stickle (§). Currency exchange rates were as follows:
Prepare an income statement for this subsidiary in stickles and then translate these amounts into U.S. dollars.

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Definitions:

Account Numbers

Unique identifiers assigned to individual accounts in an organization's chart of accounts, facilitating accurate recording, classification, and reporting of financial transactions.

Normal Credit Balances

Accounts with a credit balance as expected in the accounting equation; for instance, liabilities, equity, and revenue accounts normally have credit balances.

Revenues

The total amount of money received by a company for goods sold or services provided during a certain period of time.

Net Income

The total profit of a company after all operating expenses, taxes, and interest are deducted from total revenue.