Livingston company is a wholly owned subsidiary

For this assignment, use your Fundamentals of Advanced Accounting text and the Excel spreadsheet provided on the companion website (linked in Resources) to complete the following:

· Problem 33 on page 431. This problem tests your knowledge of converting foreign currency financial statements to U.S. dollars. In the spreadsheet, use tab P08-33 for your answers.

33. Livingston Company is a wholly owned subsidiary of Rose Corporation. Livingston operates in a foreign country with financial statements recorded in goghs (GH), the company’s functional currency. Financial statements for the year 2017 are as follows:

Income Statement

For Year Ending December 31, 2017

Sales

GH 270,000

Cost of goods sold

(155,000)

Gross profit

115,000

Less: Operating expenses

(54,000)

Gain on sale of equipment

10,000

Net income

GH 71,000

Statement of Retained Earnings

For Year Ending December 31, 2017

Retained earnings, 1/1/17

GH 216,000

Net income

71,000

Less: Dividends

(26,000)

Retained earnings, 12/31/17

GH 261,000

Balance Sheet

December 31, 2017

Assets

Cash

GH 44,000

Receivables

116,000

Inventory

58,000

Property, plant and equipment (net)

339,000

Total assets

GH 557,000

Liabilities and Equities

Liabilities

GH 176,000

Common stock

120,000

Retained earnings, 12/31/17

261,000

Total liabilities and equities

GH 557,000

Additional Information

· The common stock was issued in 2010 when the exchange rate was $2.08 per GH; property, plant, and equipment was acquired in 2011 when the rate was $2.00 per GH.

· As of January 1, 2017, the retained earnings balance was translated as $396,520.

· The U.S.$ per GH exchange rates for 2017 follow:

January 1 $1.67

April 1 1.61

September 1 1.72

December 31 1.54

Weighted average 1.59

$1.67

· Inventory was acquired evenly throughout the year.

· The December 31, 2016, balance sheet reported a translation adjustment with a debit balance of $85,000.

· Dividends were declared on April 1, 2017, and a piece of equipment was sold on September 1, 2017. Assume that the gogh is Livingston Company’s functional currency. Translate the 2017 foreign currency financial statements into the parent’s reporting currency, the U.S. dollar.

1.61

1.72

1.54

1.59