Computing Foreign Currency Translation for Financial Statements
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Ginvold Co. began operating a subsidiary in a foreign country on January 1, 2007 by acquiring all
of the common stock for §50,000. This subsidiary immediately borrowed §120,000 on a five-year
note with ten percent interest payable annually beginning on January 1, 2008. A building was then
purchased for §170,000. This property had a ten-year anticipated life and no salvage value and
was to be depreciated using the straight-line method. The building was rented for three years to a
group of local doctors for §6,000 per month. By year-end, payments totaling §60,000 had been
made. On October 1, §5,000 was paid for a repair made on that date. A cash dividend of §6,000
was transferred back to Ginvold on December 31, 2007. The functional currency for the subsidiary
was the stickle. Currency exchange rates were as follows:
§1 =
January 1, 2007 $2.40
October 1, 2007 $2.22
December 31, 2007 $2.16
2007 Average $2.28.
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Solution Summary
The solution computes foreign currency translation for financial statements.
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