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	20,000	55,000
Net Property, Plant, and Equipment	40,000	37,000
Totals	60,000	92,000
Accounts and Notes Payable	30,000	32,000
Common Stock	20,000	20,000
Retained Earnings	10,000	40,000
Totals	60,000	92,000

GRANT MANAGEMENT CONSULTANTS Consolidated Income and Retained Earnings Statement for the Year Ended December 31, 2014
Revenues	75,000
Operating Expenses including Depreciation of 3,000 francs	30,000
Net Income	45,000
Dividends Declared and Paid	15,000
Increase in Retained Earnings	30,000

Direct exchange rates for Swiss franc are:

	Dollars per Swiss Franc
January 1, 2014	$1.09
December 31, 2014	1.03
Average for 2014	1.06
Dividend declaration and payment date	1.08

Required:

1. Translate the year-end balance sheet and income statement of the foreign subsidiary using the current rate method of translation.
2. Prepare a schedule to verify the translation adjustment.
3. Convert (remeasure) the financial statements of the foreign subsidiary using the temporal method of translation.
4. Prepare a schedule to verify the translation gain or loss.

Answer 1