Solution P14-3

1 Soo Company, Ltd.

Translation Worksheet for 2011

British Exchange
Pounds Rate US Dollars
Debits
Cash 20,000 $1.65 C $ 33,000
Accounts receivable — net 70,000 1.65 C 115,500
Inventories 50,000 1.65 C 82,500
Equipment 800,000 1.65 C 1,320,000
Cost of sales 350,000 1.63 A 570,500
Depreciation expense 80,000 1.63 A 130,400
Operating expenses 100,000 1.63 A 163,000
Dividends 30,000 1.62 R 48,600
1,500,000 $2,463,500
Credits
Accumulated depreciation 330,000 $1.65 C $ 544,500
Accounts payable 70,000 1.65 C 115,500
Capital stock 400,000 1.60 H 640,000
Retained earnings 100,000 measured 160,000
Sales 600,000 1.63 978,000
Equity adjustment from translation 25,500
1,500,000 $2,463,500

2 Journal entries — 2011

January 1, 2011
Investment in Soo $800,000
Cash $800,000
To record purchase of Soo at book value.

During 2011
Cash $ 48,600
Investment in Soo $ 48,600
To record dividends from Soo.

December 31, 2011

Investment in Soo $139,600
Income from Soo $114,100
Equity adjustment from translation 25,500
To record income from Soo and enter equity adjustment for
currency fluctuations.

Check:
Investment in Soo 1/1 $800,000 Capital stock 400,000 £
Dividends (48,600) Retained earnings 1/1 100,000 £
Income from Soo 114,100 Add: Income 70,000 £
Equity adjustment 25,500 Less: Dividends (30,000)£
Investment in Soo 12/31 $891,000 Stockholders’ equity 540,000 £
Current rate $ 1.65
$891,000

3.
Book Value Beginning Net Assets 50,000 pounds x ($1.65 - $1.60) $25,000
Add: Net income 70,000 pounds x ($1.65 - $1.63) 1,400
Less: Dividends 30,000 pounds x ($1.65 - $1.62) (900)
Effect of exchange rate changes on net assets $25,500