Reference no: EM131619963

Question - Kingsfield starts a subsidiary operation in a foreign country on January 1, 2015. The country's currency is the kumquat (KQ). To start this business, Kingsfield invests 10,000 kumquats. Of this amount, i t spends 3,000 kumquats immediately to acquire equipment. Later, on April 1, 2015, it also purchases land. All subsidiary operational activities occur at an even rate throughout the year. The currency exchange rates for the kumquat for this year follow:

January 1, 2015$1.71  

April 1, 2015 1.59  

June 1, 2015 1.66  

Weighted average-2015 1.64  

December 31, 2015 1.62

As of December 31, 2015, the subsidiary reports the following trial balance:

DEBIT CREDIT

Cash KQ 8,000      

Accounts receivable  9,000     

Equipment  3,000      

Accumulated depreciation   KQ 600   

Land 5,000     

Accounts payable    3,000    

Notes payable (due 2018)    5,000    

Common stock    10,000    

Dividends declared (6/1/15)  4,000      

Sales    25,000    

Salary expense  5,000      

Depreciation expense  600      

Miscellaneous expenses  9,000  

Totals KQ43,600    KQ43,600 

A corporation based in East Lansing, Michigan, Kingsfield uses the U.S. dollar as its reporting currency.

a. Assume that the subsidiary's functional currency is the kumquat. Prepare a trial balance for it in U.S. dollars so that consolidated financial statements can be prepared.

b. Assume that the subsidiary's functional currency is the U.S. dollar. Prepare a trial balance for it in U.S. dollars so that consolidated financial statements can be prepared.