Reference no: EM132759977

Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2017, by investing capital in the amount of 61,000 pounds. The subsidiary immediately borrowed 158,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2018. The subsidiary then purchased for 219,000 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 8,600 pounds per month. By year-end, rent payments totaling 86,000 pounds had been received, and 17,200 pounds was in accounts receivable. On October 1, 4,500 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 12,900 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 $ 1.70 = 1 Pound
October 1, 2017 1.75 = 1
December 31, 2017 1.78 = 1
Average for 2017 1.74 = 1

Problem 1: Prepare a statement of cash flows in pounds for Sullivan's Island Company's foreign subsidiary and then translating these amounts into U.S.