Question

Bellingham Corporation, a U.S. company, acquired a 100% interest in Kayno Manufacturing, a Japanese company, on December 31, 2017, when the exchange rate for the Japanese yen (JPY)) was 103.960. Kayno’s functional currency is the Japanese Yen. Relevant exchange rates for JPY are:

			Japanese yen
Current rate December 31,2018			¥101.94
Current rate December 31,2017			¥103.96
Average rate for 2018			¥103.03
March 31, 2018			¥102.34
Rate when dividends were paid			¥103.75

Kanyo Adjusted trial balance
			December 31,		December 31,
			2017		2018
			¥-		¥-
	Accounts payable		-4,300		-5,200
	Accounts receivable		2,050		2,810
	Accumulated depreciaiton		-6,600		-8,325
	Additional paid-in-capital		-10,625		-10,625
	Amortization expense		-		785
	Bonds payable		-10,000		-10,000
	Cash		1,650		2,650
	Common stock		-4,000		-4,000
	Cost of goods sold		-		9,500
	Depreciation expense		-		1,725
	Discount on bonds payable		250		200
	Dividends		-		1,250
	Inventory (at FIFO cost)	(at FIFO cost)	3,590		5,220
	Other operating expenses Patent		-		925
	Patent		7,850		7,065
	Plant& equipment		24,750		26,250
	Retained earnings		-4,615		-4,615
	Sales				-15,615

Information relevant to selected balance sheet items				-		-
1. Kayno's inventories were purchased evenly throughout the year. The 12/18/18 inventory was acquired
when the exchange rate was JPY 103.881.
2. Kayno Manufacturing purchased the Plant & Equipment on the opening balance sheet in 2012 when
the exchange rate was JPY 98.153. On March 31, 2017, Kayno purchased JPY 1,500 in equipment. The
equipment has a 15 year life with no salvage value. Kayno computes depreciation to the nearest month.
3. There have been no changes in Kayno's capital stock since Bellingham purchased its 100% interest on 12/31/17
4. Other operating expenses were incurred proportionately throughout 2018.
Required: Prepare an unclassified balance sheet, multistep income statement and a retained earnings
statement, in good form, for Kayno Manufacturing in U.S. dollars for the year ended December 31, 2018
assuming Kayno's functional currency is the Japenese yen. Also prepare a proof of the translation adjustment.

Answer 1

unclassified balance sheet, multistep income statement and retained earnings statement