Panda Corporation, a U.S. company, formed a British subsidiary on January 1, 2014 by investing 450,000 British pounds (£) in exchange for all of the subsidiary's no-par common stock. The British subsidiary, Sky Corporation, purchased real property on April 1, 2014 at a cost of £500,000, with £100,000 allocated to land and £400,000 allocated to a building. The building is depreciated over a 40-year estimated useful life on a straight-line basis with no salvage value. The British pound is Sky's functional currency and its reporting currency. The British economy does not have high rates of inflation. Exchange rates for the pound on various dates were: January 01, 2014 = 1£ = $1.60 April 01, 2014 = 1£ = $1.61 December 31, 2014 =1£= $1.68 2014 average rate= 1£ = $1.66
Required: Prepare Sky's: a. Translation working papers; b. Translated income statement; and c. Translated balance sheet.
Transcribed Image Text:Sky's adjusted trial balance is presented below for the year ended December 31, 2014.
In Pounds
Debits:
Cash
£ 220,000
Accounts receivable
52,000
Inventory
59,000
Building
400,000
Land
100,000
Depreciation expense
Other expenses
Cost of goods sold
7,500
110,000
220,000
£1,168,500
Total debits
Credits
Accumulated depreciation
Accounts payable
£7,500
111,000
Common stock
450,000
Retained earnings
Equity adjustment
Sales revenue
600,000
Total credits
£1,168,500
Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video
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