Assume a Foreign Subsidiary Is Formed on January 1, Year

question 3

Essay

Assume a foreign subsidiary is formed on January 1, Year 1 when the rate of exchange is 1 foreign currency (FC) = $1.00.On June 30, Year 1, the rate of exchange was 1 FC = $1.25 and on December 31, the rate of exchange was 1 FC = $1.35.The first year resulted in the following transactions:
January 1: The foreign subsidiary received $500,000 equity investment in dollars from the parent company in exchange for common stock.
January 1: The foreign subsidiary purchased machinery for $300,000 and inventory $200,000 for cash.
June 30: The foreign subsidiary sold 50% of the inventory on account for $150,000.
December 31: The receivable from the sale of inventory was fully collected.
Instructions: Make the necessary journal entries to record for the U.S.parent company in U.S.dollars.

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