Reference no: EM132803008

Broadmore Company began operating a subsidiary in a foreign country on January 1, 2018, by acquiring all of its common stock for 80,000 krones, which was equal to fair value. This subsidiary immediately borrowed 200,000 krones on a five-year note with 10 percent interest payable annually beginning on January 1, 2019. The subsidiary then purchased for 280,000 krones a building that had a 10-year anticipated life and no salvage value and is to be depreciated using the straight-line method. The subsidiary rented the building for three years to a group of local doctors for 10,000 krones per month. By year-end, payments totaling 100,000 krones had been received. On October 1, 8,000 krones were paid for a repair made on that date. The subsidiary transferred a cash dividend of 10,000 krones back to Broadmore on December 31, 2018.

The functional currency for the subsidiary is the krone. Currency exchange rates for 1 krone follow:

January 1, 2015 $1.90 = 1 krone

October 1, 2015 1.75 = 1 krone

Average for 2015 1.80 = 1 krone

December 31, 2015 1.70 = 1 krone

Question 1: Make an income statement, statement of retained earnings, and balance sheet for this subsidiary in krones and then translate these amounts into U.S. dollars.