Question

On January 1, 20X1, Kiner Company formed a foreign subsidiary that issued all of its currently outstanding common stock on that date. Selected accounts from the balance sheets, all of which are shown in local currency units, are as follows: December 31 20X2 20X1 Accounts Receivable (net of allowance for uncollectible accounts of 1,900 LCU on December 31, 20X2, and 1,700 LCU on December 31, 20X1) LCU 45,000 LCU 40,000 Inventories, at cost 68,000 63,000 Property, Plant and Equipment (net of allowance for accumulated depreciation of 37,000 LCU on December 31, 20X2, and 18,000 LCU on December 31, 20X1) 205,300 190,000 Long-Term Debt 100,000 120,000 Common Stock, authorized 19,000 shares, par value 10 LCU per share; issued and outstanding, 9,500 shares on December 31, 20X2, and December 31, 20X1 95,000 95,000 Additional Information: Exchange rates are as follows: LCU $ January 1, 20X1–July 31, 20X1 2.0 = 1 August 1, 20X1–October 31, 20X1 1.8 = 1 November 1, 20X1–June 30, 20X2 1.7 = 1 July 1, 20X2–December 31, 20X2 1.5 = 1 Average monthly rate for 20X1 1.9 = 1 Average monthly rate for 20X2 1.6 = 1 An analysis of the accounts receivable balance is as follows: 20X2 20X1 Accounts Receivable: Balance at beginning of year LCU 41,700 Sales (42,000 LCU per month in 20X2 and 37,000 LCU per month in 20X1) 504,000 LCU 444,000 Collections (495,600 ) (401,000 ) Write-offs (May 20X2 and December 20X1) (3,200 ) (1,300 ) Balance at end of year LCU 46,900 LCU 41,700 20X2 20X1 Allowance for Uncollectible Accounts: Balance at beginning of year LCU 1,700 Provision for uncollectible accounts 3,400 LCU 3,000 Write-offs (May 20X2 and December 20X1) (3,200 ) (1,300 ) Balance at end of year LCU 1,900 LCU 1,700 An analysis of inventories, for which the first-in, first-out inventory method is used, follows: 20X2 20X1 Inventory at beginning of year LCU 63,000 Purchases (June 20X2 and June 20X1) 315,000 LCU 355,000 Goods available for sale LCU 378,000 LCU 355,000 Inventory at end of year (68,000 ) (63,000 ) Cost of goods sold LCU 310,000 LCU 292,000 On January 1, 20X1, Kiner’s foreign subsidiary purchased land for 28,000 LCU and plant and equipment for 180,000 LCU. On July 4, 20X2, additional equipment was purchased for 37,000 LCU. Plant and equipment is being depreciated on a straight-line basis over a 10-year period with no residual value. A full year’s depreciation is taken in the year of purchase. On January 15, 20X1, 7 percent bonds with a face value of 120,000 LCU were issued. These bonds mature on January 15, 20X7, and the interest is paid semiannually on July 15 and January 15. The first interest payment was made on July 15, 20X1. Required: Prepare a schedule translating the selected accounts into U.S. dollars as of December 31, 20X1, and December 31, 20X2, respectively, assuming that the local currency unit is the foreign subsidiary’s functional currency. (Round your dollar amounts to nearest whole dollar.)

KINER COMPANY'S FOREIGN SUBSIDIARY Translation of Selected Captions into United States Dollars December 31, 20X2, and December 31, 20X1 Balance in LCUs Indirect Exchange Rate Translated into U.S. Dollars December 31, 20X1: Accounts receivable (net) 40,000 Inventories, at cost 63,000 Property, plant and equipment (net) 190,000 Long-term debt 120,000 Common stock 95,000 December 31, 20X2: Accounts receivable (net) 45,000 Inventories, at cost 68,000 Property, plant and equipment (net) 205,300 Long-term debt 100,000 Common stock 95,000

Answer 1

KINER COMPANY'S FOREIGN SUBSIDIARY Translation of Selected Captions into United States Dollars December 31, 20X2, and December 31, 20X1
	Balance in LCUs	Indirect exchange rate	Translated into U.S. Dollars
December 31,20X1
Accounts receivable (net)	40000	1.7 LCU = $1	23529
Inventories, at cost	63000	1.7 LCU = $1	37059
Property, plant and equipment (net)	190000	1.7 LCU = $1	111765
Long-term debt	120000	1.7 LCU = $1	70588
Common stock	95000	2.0 LCU = $1	47500
December 31,20X2
Accounts receivable (net)	45000	1.5 LCU = $1	30000
Inventories, at cost	68000	1.5 LCU = $1	45333
Property, plant and equipment (net)	205300	1.5 LCU = $1	136867
Long-term debt	100000	1.5 LCU = $1	66667
Common stock	95000	2.0 LCU = $1	47500

Translated into US dollars = balance in LCUs / Indirect exchange rate

For example:

Accounts receivable (net) of December 31, 20X1 = 40000 / 1.7 = 23529