Ginvold Co -Prepare a Statement of Cash Flows for This Subsidiary in January

question 51

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 cash flows for this subsidiary in stickles and then translate the amounts into U.S.dollars.
Ginvold Co.Subsidiary
Statement of Cash Flows
For the Year Ended,December 31,2011

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Definitions:

Purely Competitive

A market structure characterized by many sellers offering identical products, where no single seller can influence the market price.

Resource Supply Curve

A graphical representation illustrating the relationship between the price of a specific resource and the amount of it that suppliers are willing to produce and sell.

Nominal Wage

The amount of money paid to an employee without adjustment for inflation or deflation, often referred to as the dollar wage.

Price Level

The mean of present costs for all types of products and services generated within the economy.