Question

On January 1, 2014, Trenten Systems, a U.S.-based company, purchased a controlling interest in Grant Management Consultants located in Zurich, Switzerland. The acquisition was treated as a purchase transaction. The 2014 financial statements stated in Swiss francs are given below. GRANT MANAGEMENT CONSULTANTS Comparative Balance Sheets January 1 and December 31, 2014 Jan. 1 Dec. 31 Cash and Receivables 20,400 55,000 Net Property, Plant, and Equipment 40,200 37,400    Totals 60,600 92,400 Accounts and Notes Payable 29,400 32,000 Common Stock 19,700 19,700 Retained Earnings 11,500 40,700    Totals 60,600 92,400 GRANT MANAGEMENT CONSULTANTS Consolidated Income and Retained Earnings Statement for the Year Ended December 31, 2014 Revenues 74,300 Operating Expenses including Depreciation of 2,800 francs 30,100 Net Income 44,200 Dividends Declared and Paid 15,000 Increase in Retained Earnings 29,200 Direct exchange rates for Swiss franc are: Dollars per Franc January 1, 2014 $0.5987 December 31, 2014 0.5321 Average for 2014 0.5654 Dividend declaration and payment date 0.5810

(a) Convert (remeasure) the financial statements of the foreign subsidiary using the temporal method of translation. (Round answers to 0 decimal places, e.g. 5,125. Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).) Swiss Francs Translation Rate $ Balance Sheet $         Total         Total Consolidated Income Statement and Retained Earnings Statement DividendsNet Income / (Loss)Net Income to Retained EarningsOperating Expenses: DepreciationOperating Expenses: OtherRetained Earnings - 1/1Retained Earnings - 12/31RevenuesTotal Cost & ExpensesTotal RevenuesTranslation Loss DividendsNet Income / (Loss)Net Income to Retained EarningsOperating Expenses: DepreciationOperating Expenses: OtherRetained Earnings - 1/1Retained Earnings - 12/31RevenuesTotal Cost & ExpensesTotal RevenuesTranslation Loss DividendsNet Income / (Loss)Net Income to Retained EarningsOperating Expenses: DepreciationOperating Expenses: OtherRetained Earnings - 1/1Retained Earnings - 12/31RevenuesTotal Cost & ExpensesTotal RevenuesTranslation Loss DividendsNet Income / (Loss)Net Income to Retained EarningsOperating Expenses: DepreciationOperating Expenses: OtherRetained Earnings - 1/1Retained Earnings - 12/31RevenuesTotal Cost & ExpensesTotal RevenuesTranslation Loss DividendsNet Income / (Loss)Net Income to Retained EarningsOperating Expenses: DepreciationOperating Expenses: OtherRetained Earnings - 1/1Retained Earnings - 12/31RevenuesTotal Cost & ExpensesTotal RevenuesTranslation Loss DividendsNet Income / (Loss)Net Income to Retained EarningsOperating Expenses: DepreciationOperating Expenses: OtherRetained Earnings - 1/1Retained Earnings - 12/31RevenuesTotal Cost & ExpensesTotal RevenuesTranslation Loss DividendsNet Income / (Loss)Net Income to Retained EarningsOperating Expenses: DepreciationOperating Expenses: OtherRetained Earnings - 1/1Retained Earnings - 12/31RevenuesTotal Cost & ExpensesTotal RevenuesTranslation Loss DividendsNet Income / (Loss)Net Income to Retained EarningsOperating Expenses: DepreciationOperating Expenses: OtherRetained Earnings - 1/1Retained Earnings - 12/31RevenuesTotal Cost & ExpensesTotal RevenuesTranslation Loss

Answer 1

Answer :

Conversion of  the financial statements of the foreign subsidiary using the temporal method of translation :

	Swiss Francs	Translation Rate	U.S. Dollars
Income Statement
Revenue	74,300	0.5654	42,009
Operating expenses: depreciation	(2,800)	0.5987	(1,676)
Operating expenses: other	(27,300)	0.5654	(15,435)
Translation loss			(232)
Net income	44,200		24,665
Retained earnings 1/1	11,500	0.5987	6,885
Dividends	(15,000)	0.581	(8,715)
Retained earnings 12/31	40,700		22,835
Balance Sheet
Cash and receivables	55,000	0.5321	29,266
Net property, plant, equipment	37,400	0.5987	22,391
Total assets	92,400		51,657
Accounts payable	32,000	0.5321	17,027
Common stock	19,700	0.5987	11,794
Retained earnings	40,700		22,835
Total labilities & equity	92,400		51,657

Note : Calculation of Translation Loss :

	Swiss Francs	Translation Rate	U.S. Dollars
Net monetary liability position - 1/1 (20,400 - 29,400)	(9,000)	$0.60	(5,388)
Adjustment for changes in net monetary position:
Increase in cash and receivables from sales	74,300	0.5654	42,009
Less: Decrease in net asset position:
Other operating expenses	(27,300)	0.5654	(15,435)
Dividends	(15,000)	0.581	(8,715)
Net asset position translated			12,471
Net monetary asset position-12/31 (55,000 - 32,000)	23,000	0.5321	12,238
Translation gain (loss)			(232)