Foreign Currency Translation U.S. Multi Company established a foreign subsidiary called For Sub

QUESTION

Foreign Currency TranslationU.S. Multi Company established a foreign subsidiary, called For Sub Company, on January 1, 2008. The local currency is the crown; on the date the subsidiary was established, the exchange rate was 2 crowns to 1 U.S. dollar. U.S. Multi invested U.S. $6,000 to get things started. In addition, a local loan in the amount of 8,000 crowns, equivalent to U.S. $4,000, was obtained. For Sub used the 20,000 crowns in initial financing to acquire the following assets:(in crowns)Cash2,000Accounts receivable4,000Inventory6,000Land8,000Total assets20,000During 2008, For Sub conducted no business operations beyond the purchase of the assets listed above. Prepare a translated balance sheet, in U.S. dollars, for For Sub as of December 31, 2008, assuming that on that date the exchange rate is (1) 4 crowns to each U.S. dollar and (2) 1 crown to each U.S. dollar.
On the date of 31st December 2008, the list of assets and liabilities were arranged in the following order as per the first option where (4 crowns equals one US$) Liabilites US$ Assets US$ Equity Share Capital 3000 Cash 500 Local Loan 2000 Accounts receivable 1000 Inventory 1500 Land 2000 Total Liabilites 5000 Total Assets 5000 Again in the second option where (1 crown equals 1 US$) and hence on the

date of 31st December 2008 the list of assets and liabilities were arranged in the following order Liabilites US$ Assets US$ Equity Share Capital 12000 Cash 2000 Local Loan 8000 Accounts receivable 4000 Inventory 6000 Land 8000 Total Liabilites 20000 Total Assets 20000

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