Question

Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2017, by investing capital in the amount of 60,000 pounds. The subsidiary immediately borrowed 140,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2018. The subsidiary then purchased for 200,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2017, the subsidiary rented the building for three years to a group of local attorneys for 8,000 pounds per month. By year-end, rent payments totaling 80,000 pounds had been received, and 16,000 pounds was in accounts receivable. On October 1, 4,000 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 12,000 pounds back to Sullivan's Island Company on December 31, 2017. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound follow: January 1, 2017 $ 2.00 = 1 Pound October 1, 2017 2.05 = 1 December 31, 2017 2.08 = 1 Average for 2017 2.04 = 1 Prepare an income statement, statement of retained earnings, and balance sheet for this subsidiary in pounds and then translate these amounts into U.S. dollars.

Answer 1

Income Statement
Revenue from Operations	96,000.00
Other Revenue	-
Total Revenue	96,000.00
Expenses
Repairs	14,000.00
Depreciation	20,000.00
Total Expenses	34,000.00
Net Income	62,000.00

Balance sheet
Assets
Cash		54,000.00
Accounts Receivable		16,000.00
Buildings and Equipment(Bet of Depreciation)	200,000.00
Less Accumulated Depreciation	20,000.00	180,000.00
Total Assets		250,000.00
Liabilities & Stockholder's Equity
10 % Note		140,000.00
Common Stock		60,000.00
Retained Earnings		50,000.00
Total Liabilities & Stockholder's Equity		250,000.00

Trial Balance
		Average Rate
	Amount in pound		Amount in Usd
Revenue from Operations	(96,000.00)	2.04	(47,058.82)
Repairs	14,000.00	2.04	6,862.75
Depreciation	20,000.00	2.04	9,803.92
Cash	54,000.00	2.08	25,961.54
Accounts Receivable	16,000.00	2.08	7,692.31
Buildings and Equipment(Bet of Depreciation)	200,000.00	2.08	96,153.85
Accumulated Depreciation	(20,000.00)	2.08	(9,615.38)
10 % Note	(140,000.00)	2.08	(67,307.69)
Common Stock	(60,000.00)	2.05	(29,268.29)
Dividend	12,000.00	2.04	5,882.35
Foreign Currency Translation Difference			893.48

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