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In: Accounting

On January 1, 2016, Safetyway Group, a U.S. company, formed a Swiss subsidiary, TEurope AG. The...

On January 1, 2016, Safetyway Group, a U.S. company, formed a Swiss subsidiary, TEurope AG. The subsidiary issued all of its currently outstanding common stock on that date. Selected accounts from its balance sheets on December 31, 2016 and 2017, all of which are shown in Swiss francs (CHF), are as follows:

December 31

(in millions) 2017 2016
Accounts receivable, net CHF 40,000 CHF 35,000
Inventories, at cost 80,000 75,000
Property, plant and equipment, net of accumulated depreciation
of CHF31,000 at December 31, 2017 and CHF14,000 at
December 31, 2016 163,000 150,000
Long-term debt 100,000 120,000
Common stock 10,000 shares authorized, issued and outstanding
5,000 shares at December 31, 2017 and December 31, 2016 50,000 50,000

Additional Information:

1. Exchange rates are as follows:

$/CHF
January 1, 2016 $0.96
June, 2016 0.98
December 31, 2016 1.04
Average rate for 2016 0.99
June, 2017 1.10
July 4, 2017 1.12
December 31, 2017 1.13
Average rate for 2017 1.09

2. An analysis of inventories, for which the FIFO inventory method is used, is as follows:

2017 2018
Inventory at beginning of year CHF 75,000 -----
Purchases (June 2017 and June 2016) 335,000 CHF 375,000
Goods available for sale 410,000 375,000
Inventory at end of year (80,000) (75,000)
Costs of goods sold CHF 330,000 CHF 300,000

3. On January 1, 2016, TEurope purchased land for CHF24,000 and plant and equipment for CHF140,000. On July 4, 2017, additional equipment was purchased for CHF30,000. Plant and equipment is depreciated on a straight-line basis over a ten-year period with no salvage value. A full year’s depreciation is taken in the year of purchase.

Required

a. Prepare a schedule remeasuring the selected accounts above into U.S. dollars (the functional currency) at December 31, 2017, and December 31, 2016, respectively. Show supporting computations in good form.

b. Prepare a schedule translating the selected accounts above into U.S. dollars at December 31, 2017, and December 31, 2016, assuming the Swiss franc is the functional currency.

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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