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    Charles Edward Company Established A Subsidiary in A Foreign Country

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    trilocksp Singh
    Charles Edward Company established a foreign subsidiary in 2017 by investing capital and obtaining a bank loan. The subsidiary purchased plant and equipment and inventory throughout the year. In 2017, the subsidiary's sales were FC 5,000 with a net income of FC 700. As of December 31, 2017, the subsidiary had total assets of FC 8,400 including cash, inventory, property and equipment.

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    Charles Edward Company Established A Subsidiary in A Foreign Country

    Uploaded by

    trilocksp Singh
    24 views1 page
    Charles Edward Company established a foreign subsidiary in 2017 by investing capital and obtaining a bank loan. The subsidiary purchased plant and equipment and inventory throughout the year. In 2017, the subsidiary's sales were FC 5,000 with a net income of FC 700. As of December 31, 2017, the subsidiary had total assets of FC 8,400 including cash, inventory, property and equipment.

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    Charles Edward Company established a foreign subsidiary in 2017 by investing capital and obtaining a bank loan. The subsidiary purchased plant and equipment and inventory throughout the year. In 2017, the subsidiary's sales were FC 5,000 with a net income of FC 700. As of December 31, 2017, the subsidiary had total assets of FC 8,400 including cash, inventory, property and equipment.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    24 views1 page

    Charles Edward Company Established A Subsidiary in A Foreign Country

    Uploaded by

    trilocksp Singh
    Charles Edward Company established a foreign subsidiary in 2017 by investing capital and obtaining a bank loan. The subsidiary purchased plant and equipment and inventory throughout the year. In 2017, the subsidiary's sales were FC 5,000 with a net income of FC 700. As of December 31, 2017, the subsidiary had total assets of FC 8,400 including cash, inventory, property and equipment.

    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    of 1

    Charles Edward Company established a subsidiary in a

    foreign country
    Charles Edward Company established a subsidiary in a foreign country on January 1, 2017,
    by investing FC 3,200,000 when the exchange rate was $0.50/FC. Charles Edward negotiated a
    bank loan of FC 3,000,000 on January 5, 2017, and purchased plant and equipment in the
    amount of FC 6,000,000 on January 8, 2017. It depreciated plant and equipment on a straight-
    line basis over a 10-year useful life. It purchased its beginning inventory of FC 1,000,000 on
    January 10, 2017, and acquired additional inventory of FC 4,000,000 at three points in time
    during the year at an average exchange rate of $0.43/FC. It uses the first-in, first-out (FIFO)
    method to determine cost of goods sold. Additional exchange rates per FC 1 during the year
    2017 follow:
    January 1-31, 2017. . . . . . . . . . . . . . . . . . . . $0.50
    Average 2017 . . . . . . . . . . . . . . . . . . . . . . . . . 0.45
    December 31, 2017. . . . . . . . . . . . . . . . . . . .... 0.38
    The foreign subsidiary's income statement for 2017 and balance sheet at December 31, 2017,
    follow:
    INCOME STATEMENT
    For the Year Ended December 31, 2017
    FC (in thousands)
    Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FC 5,000
    Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . . . . . . 3,000
    Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . . . .2,000
    Selling expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... . .400
    Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........600
    Income before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... . 1,000
    Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ 300
    Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... . .700
    Retained earnings, 1/1/17 . . . . . . . . . . . . . . . . . . . . . . . . . .........-0-
    Retained earnings, 12/31/17 . . . . . . . . . . . . . . . . . . . . . .........FC 700
    BALANCE SHEET
    At December 31, 2017
    FC (in thousands)
    Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FC 1,000
    Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....2,000
    Property, plant & equipment . . . . . . . . . . . . . . . . . . . . . . . . ....... 6,000
    Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . ........(600)
    Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....FC 8,400
    Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FC 1,500
    Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....3,000
    Contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......3,200
    Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........700
    Total liabilities and stockholders' equity . . . . . . . . . . . . ....... FC 8,400
    As the controller for Charles Edward Company, you have evaluated the characteristics of the
    foreign subsidiary to determine that the FC is the subsidiary's functional currency.

    Unlock answers here solutiondone.online

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