Ginvold Co -Prepare a Statement of Retained Earnings for This Subsidiary in January

question 75

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.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:
$\begin{array}{llcc} \text { January 1, 2011} &§ 1=\$ 2.40 \\ \text { October 1, 2011 } &§ 1=\$2.22\\ \text { Average for 2011} &§ 1=\$2.28\\ \text {December 31,2011 } &§ 1=\$2.16\\\end{array}$

-Prepare a statement of retained earnings for this subsidiary in stickles and then translate the amounts into U.S.dollars.
Ginvold Co.Subsidiary
Statement of Retained Earnings
For the Year Ended December 31,2011

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Definitions:

Par Value

Par value is the nominal or face value of a bond, share of stock, or a coupon as stated by the issuer.

Stated Value

A per-share amount set by the board of directors for no-par value stock, which is not determined by market forces.

Revaluation Surplus

An increase in the value of an asset held by a company, recognized in equity, that occurs when the asset's current market value exceeds its previously recorded cost.

Share Capital

The total amount of money raised by a company through the sale of shares to investors.