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:

Average Revenue

The average amount of money received per unit of product or service sold, calculated by dividing total revenue by the number of units sold.

Marginal Revenue

The additional revenue that a firm receives from selling one more unit of a product or service.

Marginal Cost

The extra financial burden of manufacturing an additional unit of a product or service.

Price Takers

Firms or individuals who accept the market price as given and have no power to influence that price due to the competitive nature of the market.