Reference no: EM131881234

Problem

On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 63,000. RoadTime's December 31, 20X1, trial balance in SFr is as follows:

	Debit	Credit
Cash	SFr 7,400
Accounts Receivable (net)	21,000
Receivable from Popular Creek	6,200
Inventory	28,000
Plant & Equipment	101,000
Accumulated Depreciation		SFr 10,500
Accounts Payable		12,200
Bonds Payable		54,500
Common Stock		63,000
Sales		159,700
Cost of Goods Sold	74,500
Depreciation Expense	10,500
Operating Expense	33,500
Dividends Paid	17,800
Total	SFr 299,900	SFr 299,900

Additional Information

1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $5,200 payable to RoadTime.

2. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1.

3. Equipment is depreciated by the straight-line method with a 10-year life and no residual value. A full year's depreciation is taken in the year of acquisition. The equipment was acquired on March 1.

4. The dividends were declared and paid on November 1.

5. Exchange rates were as follows:

	SFr		$
January 1	1	=	0.73
March 1	1	=	0.74
November 1	1	=	0.77
December 31	1	=	0.80
20X1 average	1	=	0.75

6. The Swiss franc is the functional currency.

Required:

a. Prepare a proof of the translation adjustment.