Below You Will Find the Balance Sheet and Income Statement

question 7

Essay

Below you will find the balance sheet and income statement of a US Corp.'s foreign subsidiary at the end of its first year of operations.The following exchange rates were in effect during the period:
Jan.1,2012 - $1 = 1FC
Dec.31,2012 - $1.70 = 1FC
The average exchange rate during the period was $1.40=1FC.The common stock was issued on January 1,2012.
Assuming that the foreign currency is the functional currency,translate the financial statements into U.S.dollars.
$\begin{array}{l}\begin{array}{lll} \text {Balance Sheet}\\ \text {As of December 31 ,}\\ \text {(Amounts in Foreign Currency)}\\ \text {Assets:}\\ \text {Cash and cash equivalents}\\ \text {Accounts Receivable}\\ \text {Inventory}\\ \text {Current Assets}\\ \text {Equipment}\\ \text {Less: Accumulated depreciation}\\ \text {Equipment-Net}\\ \text {Land}\\ \text {Total assets}\\ \text {Liabilities}\\ \text {Accounts Payable}\\ \text {Accrued Salaries Payable}\\ \text {Rent Expense Payable}\\ \text {ncome Tax Payable}\\ \text {Current Liabilities}\\ \text {Long-term note payable}\\ \text {Total Liabilities}\\ \text {Stockholders' Equity:}\\ \text {Common stock}\\ \text {Retained earnings}\\ \text {Total liabilities and stockholders' equity}\\\end{array}\begin{array}{lll}\\2012\\\\\\18,000 \\33,000 \\\underline{24,000} \\75,000 \\42,225 \\\underline{(1,725) }\\40,500 \\\underline{34,500} \\\underline{\underline{150,000}} \\\\48,000 \\14,758 \\7,500 \\\underline{3,000} \\ 73,258 \\\underline{45,000}\\18,258\\\\30,000\\\underline{1,742}\\\underline{150,00}\\\end{array}\end{array}$
$\begin{array}{l}\begin{array}{lll} \text {Income Statement}\\ \text {For the year ended December 31,2012}\\ \text {(Amounts in foreign currency)}\\ \text {Revenues}\\ \text {Cost of goods sold}\\ \text {Gross Profit}\\ \text {Operating Expenses}\\ \text {Depreciation expense}\\ \text {Salary expense}\\ \text {Insurance Expense}\\ \text {Rent Expense}\\ \text {Interest Expense}\\ \text {Total Operating Expenses}\\ \text {Income from Operations}\\ \text {Income Tax Expense}\\ \text {Net income}\\\text { Dividends paid to Common Shareholders }\end{array}\begin{array}{lll}\\\\\\97,500 \\(58,500)\\&39,000\\\\(1,725) \\(24,625) \\(1,700) \\(4,875) \\\underline{(2,520)}\\&\underline{(35,445)}\\&3,555 \\ &\underline{(1,067)} \\ &\underline{\underline{ 2.488}}\\747\\\end{array}\end{array}$

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