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    If a U.S. company starts a new subsidiary in Papua New Guinea on January 1

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    If a U.S. company starts a new subsidiary in Papua New Guinea on January 1 with an equity stake of 700 million kina (the currency of Papua New Guinea), and earns 300 million kina of income during the year which is posted to the retained earnings account, what will equity section of the December 31 balance sheet converted into U.S. dollars look like? The exchange rate on January 1 was $1.25/kina, the exchange rate on December 31 was $1.05/kina, and the company uses the average of the beginning and ending exchange rates as the period average exchange rate. (You may assume that the translation follows FASB-52's current rate method).

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    Initial equity = 700 m kina
    Net income = 300 m kina
    The average exchange rate = (beginning ...

    $2.19

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