Question

Kerry Manufacturing Company is a German subsidiary of a U.S. company. Kerry records its operations
and prepares financial statements in euros. However, its functional currency is the British pound.
Kerry was organized and acquired by the U.S. company on June 1, 20X4. The cumulative translation
adjustment as of December 31, 20X6, was $79,860. The value of the subsidiary's retained earnings expressed
in British pounds and U.S. dollars as of December 31, 20X7, was 365,000 pounds and $618,000, respectively.
On March 1, 20X7, Kerry declared a dividend of 120,000 euros. The trial balance of Kerry in euros as of
December 31, 20X7, is as follows:
	Debit	Credit
Cash	240,000
Accounts Receivable (net)	2,760,000
Inventory (at cost)	3,720,000
Marketable Securities (at cost)	2,040,000
Prepaid Insurance	210,000
Depreciable Assets	8,730,000
Accumulated Depreciation		1,417,000
Cost of Goods Sold	17,697,000
Selling, General, and
Administrative Expense	4,762,000
Sales Revenue		26,430,000
Investment Income		180,000
Accounts Payable		2,120,000
Unearned Sales Revenue		960,000
Loans and Mortgage Payable		5,872,000
Common Stock		1,500,000
Paid-in Capital in Excess of Par		210,000
Retained Earnings		1,470,000
Total	40,159,000	40,159,000
The marketable securities were acquired on November 1, 20X6, and the prepaid insurance was acquired on
December 1, 20X7. The cost of goods sold and the ending inventory are calculated by the weighted-average
method.
The following items are measured in pound at the December 31, 20x7.
	Euros	Pounds
Accumulated depreciation
Depreciable Assets	8,730,000	2,671,380
Cost of Goods Sold	17,697,000	5,262,294
Selling, General, Admin. Expense	4,762,000	1,415,886
Accumulated Depreciation	1,417,000	773,915
Sales Revenue	26,430,000	7,866,030
On November 1, 20X6, Kerry received a customer prepayment valued at 3,000,000 euros. On February 1,					3000000
20X7, 2,040,000 euros of the prepayment was earned. The balance remains unearned as of December 31,					2040000
20X7.					960000
Relevant exchange rates are as follows:
	Pounds/Euro	$/Pound
June 1, 20X4	0.31	$1.60
March 1, 20X6	0.3	$1.64
November 1, 20X6	0.305	$1.65
December 31, 20X6	0.31	$1.68
February 1, 20X7	0.302	$1.67
March 1, 20X7	0.3	$1.66
December 1, 20X7	0.29	$1.64
December 31, 20X7	0.288	$1.64
20X7 average	0.297	$1.66
Required:
Prepare a remeasured and translated trial balance of the Kerry Manufacturing
Company as of December 31, 20X7.
ANS:
Kerry Manufacturing Company
Trial Balance Translation
December 31, 20X7
		Relevant		Relevant
		Exchange		Exchange
	Balance in	Rate	Balance in	Rate	Balance in
Account	Euros	(Pds/Euros)	Pounds	($/Pds)	Dollars
Cash	240,000
Accounts Receivable (net)	2,760,000
Inventory (at cost)	3,720,000
Marketable Securities (at cost)	2,040,000
Prepaid Insurance	210,000
Depreciable Assets	8,730,000
Cost of Goods Sold	17,697,000
Selling, General, Admin. Expense	4,762,000
Exchange Loss
Total Debits	40,159,000		12,183,001		20,117,316
Accumulated Depreciation	1,417,000
Sales Revenue	26,430,000
Investment Income	180,000
Accounts Payable	2,120,000
Unearned Sales Revenue	960,000
Loans and Mortgage Payable	5,872,000
Common Stock	1,500,000
Paid-in Capital in Excess of Par	210,000
Retained Earnings	1,470,000
Cumulative Translation
Adjustment			0		-19,392
Total Credits	40,159,000		12,183,001		20,117,316

Answer 1

Trial balance of Kerry Manufacturing Company
Accounts	Balance in Euros	Relevant exchange rate (Pds/Euros)	Balance in Pounds	Relevant exchange rate ($/Pds)	Balance in Dollars
Cash	240000	0.288	69120	1.64	113356.8
Accounts receivable (Net)	2760000	0.288	794880	1.64	1303603
Inventory at cost	3720000	0.297	1104840	1.66	1834034
Marketable securities at cost	2040000	0.305	622200	1.65	1026630
Prepaid insurance	210000	0.29	60900	1.64	99876
Depreciable assets	8730000	0.288	2514240	1.64	4123354
Costs of goods sold	17697000	0.297	5256009	1.66	8724975
Selling, general and administrative exp.	4762000	0.297	1414314	1.66	2347761
Exchange loss			6399
Total debits	40159000		11842902		19573590
Accumulated depreciation	1417000	0.288	408096	1.64	669277.4
Sales revenue	26430000	0.297	7849710	1.66	13030519
Investment income	180000	0.297	53460	1.66	88743.6
Accounts payable	2120000	0.288	610560	1.64	1001318
Unearned sales revenue	960000	0.288	276480	1.64	453427.2
Loans and mortgage payable	5872000	0.288	1691136	1.64	2773463
Common stock	1500000	0.31	465000	1.6	744000
Paid in capital in excess of par	210000	0.31	65100	1.6	104160
Retained earnings	1470000	0.288	423360	1.64	694310.4
Cumulative translation
Adjustments					14371.5
Total credits	40159000		11842902		19559219