Kingsfield establishes a subsidiary operation in a foreign country on January 1, 2020. The country’s currency is the rial (R). To start this business, Kingsfield invests 10,000 rials. Of this amount, it spends 3,000 rials immediately to acquire equipment. Later, on April 1, 2020, it also purchases land. All subsidiary operational activities occur at an even rate throughout the year. Kingsfield uses the U.S. dollar as its reporting currency. The U.S. dollar ($) exchange rates for the rial for 2020 follow: January 1 $ 1.71 April 1 1.59 June 1 1.66 Weighted average 1.64 December 31 1.62 As of December 31, 2020, the subsidiary reports the following trial balance: Debits Credits Cash R 8,000 Accounts receivable 9,000 Equipment 3,000 Accumulated depreciation R 600 Land 5,000 Accounts payable 3,000 Notes payable (due 2028) 5,000 Common stock 10,000 Dividends declared (6/1/20) 4,000 Sales 25,000 Salary expense 5,000 Depreciation expense 600 Miscellaneous expenses 9,000 Totals R 43,600 R 43,600 Assume that the subsidiary’s functional currency is the rial (R). Prepare a trial balance for it in U.S. dollars so that 2020 consolidated financial statements can be prepared. Assume that the subsidiary’s functional currency is the U.S. dollar. Prepare a trial balance for it in U.S. dollars so that 2020 consolidated financial statements can be prepared.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Kingsfield establishes a subsidiary operation in a foreign country on January 1, 2020. The country’s currency is the rial (R). To start this business, Kingsfield invests 10,000 rials. Of this amount, it spends 3,000 rials immediately to acquire equipment. Later, on April 1, 2020, it also purchases land. All subsidiary operational activities occur at an even rate throughout the year. Kingsfield uses the U.S. dollar as its reporting currency. The U.S. dollar ($) exchange rates for the rial for 2020 follow:


January 1	$	1.71
April 1		1.59
June 1		1.66
Weighted average		1.64
December 31		1.62

As of December 31, 2020, the subsidiary reports the following trial balance:

	Debits		Credits
Cash	R	8,000
Accounts receivable		9,000
Equipment		3,000
Accumulated depreciation				R	600
Land		5,000
Accounts payable					3,000
Notes payable (due 2028)					5,000
Common stock					10,000
Dividends declared (6/1/20)		4,000
Sales					25,000
Salary expense		5,000
Depreciation expense		600
Miscellaneous expenses		9,000
Totals	R	43,600		R	43,600

Assume that the subsidiary’s functional currency is the rial (R). Prepare a trial balance for it in U.S. dollars so that 2020 consolidated financial statements can be prepared.
Assume that the subsidiary’s functional currency is the U.S. dollar. Prepare a trial balance for it in U.S. dollars so that 2020 consolidated financial statements can be prepared.

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