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Foreign Statement Translation

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Royal Tea, a wholly-owned English subsidiary of U.S. Beverages (a U.S. firm) maintains its inventory at cost, and Royal Tea's books are reflected in British pound sterling. U.S. Beverages' functional currency is U.S. dollars.

Determine the inventory value using both the temporal and current methods. Show how this will be reflected on Royal Tea's statements and the consolidated statements of U.S. Beverages. Use the following information for this calculation:
The historical cost of inventory is £750,000.
The historical exchange rate is $0.650.
The current exchange rate is $0.689.

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Dear student,

Solution attached and all work shown.

Royal Tea, a wholly-owned English subsidiary of U.S. Beverages (a U.S. firm) maintains its inventory at cost, and Royal Tea's books are reflected in British pound sterling. U.S. Beverages' functional currency is U.S. dollars.

Determine the inventory value using both the temporal and current methods. Show how this will be reflected on Royal Tea's statements and ...

Solution Summary

The inventory values using both the temporal and current methods are determined. Royal Tea's statements for consolidated statements of U.S. beverages.

$2.19
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Financial Statement Translation

Prepare financial statements for a foreign subsidiary and then translate them into U.S. dollars. The first item has been completed for you as an example.

Fenwicke Company Subsidiary
Income Statement
LCU U.S. Dollars
Rent revenue 60,000 x $1.90 A = $114,000
Interest expense
Depreciation expense
Repair expense
Net income

Statement of Retained Earnings
LCU U.S. Dollars
Retained earnings 1-Jan -0- -0-
Net income
Dividends paid
Retained earnings, 12/31

Balance Sheet
LCU U.S. Dollars
Cash
Accounts receivable
Building
Accumulated depreciation
Total assets
Interest payable
Note payable
Common stock
Retained earnings
Translation adjustment
Total liabilities and equities

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