Ginvold Co

question 15

Essay

Ginvold Co. began operating a subsidiary in a foreign country on January 1, 2011 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, 2012. A building was then purchased for §170,000 on January 1, 2011. 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, 2011. The functional currency for the subsidiary was the Stickle (§). Currency exchange rates were as follows:
Prepare a statement of retained earnings for this subsidiary in stickles and then translate the amounts into U.S. dollars.

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Definitions:

Eversion

The act of turning inside out or being turned inside out, typically used in medical contexts to describe a part of the body.

Abduction

The movement of a limb or other part away from the midline of the body or from another part.

Flexion

The action of bending or the condition of being bent, often in reference to a limb or joint in the body.

Extension

The act of increasing the length or duration of something, or a continuation of space or time.