Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 73,000 pounds. The subsidiary immediately borrowed 146,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 219,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,100 pounds per month. By year-end, rent payments totaling 81,000 pounds had been received, and 16,200 pounds was in accounts receivable. On October 1, 2020, 3,000 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,200 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound follow: January 1, 2020 October 1, 2020 December 31, 2020 Average for 2020 $3.90 = 3.95 = 3.98 3.94 = 1 Pound. 1 1 1 Prepare a statement of cash flows in pounds for Sullivan's Island Company's foreign subsidiary, and then translate this statement into U.S. dollars. (Round your exchange rate answers to 2 decimal places. Amounts to be deducted and cash outflows should be indicated with minus sign.)
Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 73,000 pounds. The subsidiary immediately borrowed 146,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 219,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,100 pounds per month. By year-end, rent payments totaling 81,000 pounds had been received, and 16,200 pounds was in accounts receivable. On October 1, 2020, 3,000 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,200 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound follow: January 1, 2020 October 1, 2020 December 31, 2020 Average for 2020 $3.90 = 3.95 = 3.98 3.94 = 1 Pound. 1 1 1 Prepare a statement of cash flows in pounds for Sullivan's Island Company's foreign subsidiary, and then translate this statement into U.S. dollars. (Round your exchange rate answers to 2 decimal places. Amounts to be deducted and cash outflows should be indicated with minus sign.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of
73,000 pounds. The subsidiary immediately borrowed 146,000 pounds on a five-year note with 10 percent interest payable annually
beginning on January 1, 2021. The subsidiary then purchased for 219,000 pounds a building that had a 10-year expected life and no
salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for
three years to a group of local attorneys for 8,100 pounds per month. By year-end, rent payments totaling 81,000 pounds had been
received, and 16,200 pounds was in accounts receivable. On October 1, 2020, 3,000 pounds was paid for a repair made to the
building. The subsidiary transferred a cash dividend of 13,200 pounds back to Sullivan's Island Company on December 31, 2020. The
functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound follow:
January 1, 2020
October 1, 2020
December 31, 2020
Average for 2020
$ 3.90 =
3.95 = 1
3.98 = 1
3.94 = 1
1 Pound
Prepare a statement of cash flows in pounds for Sullivan's Island Company's foreign subsidiary, and then translate this statement into
U.S. dollars. (Round your exchange rate answers to 2 decimal places. Amounts to be deducted and cash outflows should be
indicated with minus sign.)
Transcribed Image Text:Operating Activities:
SULLIVAN'S ISLAND COMPANY
Statement of Cash Flows
Pounds
Cash flow from operating activities
Investing Activities:
Cash flow from investing activities
Financing Activities:
Cash flow from financing activities
Effect of exchange rate change on cash
Beginning balance in cash
Ending balance in cash
$
0
0
0
0
Exchange Rate
U.S. Dollars
0
0
0
0
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