REQUIRED 1. Prepare a worksheet to translate Sar's adjusted trial balance at December 31, 2016, into U.S. dollars. 2. Prepare the necessary journal entries for Pel to account for its investment in Sar for 2016.
REQUIRED 1. Prepare a worksheet to translate Sar's adjusted trial balance at December 31, 2016, into U.S. dollars. 2. Prepare the necessary journal entries for Pel to account for its investment in Sar for 2016.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Pel, a U.S. firm, paid $308,000 for all the common stock of Sar of Israel on January 1, 2016, when the
exchange rate for sheqels was $0.35. Sar's equity on this date consisted of 500,000 sheqels common stock
and 300,000 sheqels retained earnings. The $28,000 (80,000 sheqels) excess is attributable to a patent
with a 10-year amortization period. Sar's functional currency is the sheqel.
Sar's adjusted trial balance at December 31, 2016, in sheqels is as follows:
Sheqels
Debits
Cash
Receivables-net
Inventories
Land
Equipment-net
Buildings-net
Expenses
Exchange loss (advance)
Dividends
40,000
50,000
150,000
Credits
Accounts payable
Other liabilities
Advance from Pel
160,000
Common stock
300,000 Retained earnings 1/1
500,000 Sales
400,000
20,000
100,000
1,720,000
Sheqels
120,000
60,000
140,000
500,000
300,000
600,000
1,720,000
On January 2, 2016, Pel advanced $42,000 (120,000 sheqels) to Sar. This advance was short-
term, denominated in U.S. dollars, and made when the exchange rate for sheqels was $0.35. In
June 2016, Sar paid a 100,000-sheqel dividend when the exchange rate was $0.33. The average and
year-end exchange rates for sheqels are $0.32 and $0.30, respectively.
REQUIRED
1. Prepare a worksheet to translate Sar's adjusted trial balance at December 31, 2016, into U.S. dollars.
2. Prepare the necessary journal entries for Pel to account for its investment in Sar for 2016.
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