Asked by Regan Waite on Jul 11, 2024
Verified
The January 1, 20X5 retained earnings balance of the London Branch of the Liverpool Company correctly translated to Canadian dollars was $1,783,774. The beginning inventory of £380,000 was acquired during the last quarter of 20X4 and the ending inventory was acquired during the last quarter of 20X5. Sales and purchases were made, and other expenses were incurred, evenly throughout the year.
Required:
Translate the statement of comprehensive income and statement of changes in equity-partial-retained earnings section of Liverpool Company for the year ending December 31, 20X5, into dollars, assuming that the temporal method is appropriate.
British Tweeds
A type of woolen fabric originated from the UK, known for its quality and durability.
Pounds Sterling
The official currency of the United Kingdom, which is also used in other territories and dependencies.
Temporal Method
An exchange rate conversion method used in financial reporting where monetary assets and liabilities are converted at current rates and non-monetary items at historical rates.
- Determine the translation of financial statements into Canadian currency using the temporal method.
- Investigate the influence of exchange rates on the conversion of financial statements.
Verified Answer
TQ
Tabish QamarJul 18, 2024
Final Answer :
LIVERPOOL COMPANY-London Branch \text { LIVERPOOL COMPANY-London Branch } LIVERPOOL COMPANY-London Branch
Statement of Comprehensive Income \text {Statement of Comprehensive Income }Statement of Comprehensive Income
Year Ended December 31.20X5\text {Year Ended December 31.20X5}Year Ended December 31.20X5 Sales £2,300,0001.5093$3,471,390 Cost of goods sold (see note 1)(1,200,000)(1,837,317) Depreciation expense see note 2(240,000)1.8365(440,760)(60,000)1.5426(92,556) Other expenses (300,000)1.5093(452,790) Translation gain (see note 3) 62,589\begin{array}{llll}\text { Sales } & £ 2,300,000 & 1.5093 & \$ 3,471,390 \\\text { Cost of goods sold (see note } 1) & (1,200,000) && (1,837,317) \\\text { Depreciation expense see note } 2 & (240,000) & 1.8365 & (440,760)\\& (60,000) & 1.5426 & (92,556) \\\text { Other expenses } & (300,000) & 1.5093 & (452,790) \\\text { Translation gain (see note 3) } & & & 62,589\end{array} Sales Cost of goods sold (see note 1) Depreciation expense see note 2 Other expenses Translation gain (see note 3) £2,300,000(1,200,000)(240,000)(60,000)(300,000)1.50931.83651.54261.5093$3,471,390(1,837,317)(440,760)(92,556)(452,790)62,589 Comprehensive income £500,000‾$710,666‾\begin{array}{ll} \text { Comprehensive income } & \underline {£500,000 }&\underline {\$710,666} \\\end{array} Comprehensive income £500,000$710,666
Note 1:
Cost of Goods Sold OI 380,0001.5612593,256 I 1,270,0001.50931,916,811 EI (450,000)‾1.4950(672,750)‾1,200,000‾1,837,317‾\begin{array} { l l l l l } \text { Cost of Goods Sold } & \text { OI } & 380,000 \quad 1.5612 & 593,256 \\& \text { I } & 1,270,000\quad 1.5093 & 1,916,811 \\& \text { EI } & \underline { ( 450,000 ) } \quad1.4950 & \underline { ( 672,750 ) } \\& & \underline { 1,200,000 } & \underline {1,837,317} \end{array} Cost of Goods Sold OI I EI 380,0001.56121,270,0001.5093(450,000)1.49501,200,000593,2561,916,811(672,750)1,837,317 Note 2: The historical rate is the rate on the date that the subsidiary was acquired by the parent, which was January 1, 1986.
Note 2:
Gain or Loss on Net Monetary Items
£$ Opening net monetary assets (1,280,000)1.5426(1,974,528) Inflows Sales 2,300,0001.50933,471,390 Outflows Rurchases (1,270,000)1.5093(1,916,811) Other (300,000)1.5093(452,790) Dividends (200,000)‾1.4730(294,600)‾\begin{array} { l l l l l } & £ & & \$ \\\text { Opening net monetary assets } & ( 1,280,000 ) & 1.5426 & ( 1,974,528 ) \\\text { Inflows } \quad \text { Sales } & 2,300,000 & 1.5093 & 3,471,390 \\\text { Outflows } \quad \text { Rurchases } & ( 1,270,000 ) & 1.5093 & ( 1,916,811 ) \\\quad\quad\quad\quad\quad \text { Other } & ( 300,000 ) & 1.5093 & ( 452,790 ) \\\quad\quad\quad\quad\quad \text { Dividends } &\underline{ ( 200,000 ) }& 1.4730 &\underline{ ( 294,600 )}\end{array} Opening net monetary assets Inflows Sales Outflows Rurchases Other Dividends £(1,280,000)2,300,000(1,270,000)(300,000)(200,000)1.54261.50931.50931.50931.4730$(1,974,528)3,471,390(1,916,811)(452,790)(294,600)
Derived ending net monetary assets (1,167,339) Actual ending non-monetary assets (750,000)‾1.4730(1,104,750)‾ Gain on net monetary assets 62,589‾\begin{array}{llll}\text { Derived ending net monetary assets } & & & (1,167,339) \\\text { Actual ending non-monetary assets } & \underline{(750,000)} & 1.4730 & \underline{(1,104,750)} \\\text { Gain on net monetary assets } & & & \underline{62,589}\end{array} Derived ending net monetary assets Actual ending non-monetary assets Gain on net monetary assets (750,000)1.4730(1,167,339)(1,104,750)62,589
LIVERPOOLCOMPANY Statement of Changes in Equity-Partial-Retained Earnings section Year Ended December 31, 20X5£$Retained earnings - 1/1850,0001,783,774 Comprehensive in 500,000710,666 Less: Dividends (200.000)‾1.4730(294,600)‾\begin{array}{c}\text { LIVERPOOLCOMPANY }\\ \text {Statement of Changes in Equity-Partial-Retained Earnings section}\\ \text { Year Ended December 31, 20X5}\\\\\begin{array}{lcc}& £& \$ \\ \text {Retained earnings - } 1 / 1 & 850,000 & 1,783,774 \\ \text { Comprehensive in } & 500,000 & 710,666 \\ \text { Less: Dividends } & \underline{ (200.000)}\quad 1.4730 & \underline{ (294,600)} \\\end{array}\end{array} LIVERPOOLCOMPANY Statement of Changes in Equity-Partial-Retained Earnings section Year Ended December 31, 20X5Retained earnings - 1/1 Comprehensive in Less: Dividends £850,000500,000(200.000)1.4730$1,783,774710,666(294,600) Retained earnings-end£1,150,000‾$2,199,840‾\begin{array}{ll} \text { Retained earnings-end} & £ \underline { 1,150,000} &\$ \underline {2,199,840} \\\end{array} Retained earnings-end£1,150,000$2,199,840
Statement of Comprehensive Income \text {Statement of Comprehensive Income }Statement of Comprehensive Income
Year Ended December 31.20X5\text {Year Ended December 31.20X5}Year Ended December 31.20X5 Sales £2,300,0001.5093$3,471,390 Cost of goods sold (see note 1)(1,200,000)(1,837,317) Depreciation expense see note 2(240,000)1.8365(440,760)(60,000)1.5426(92,556) Other expenses (300,000)1.5093(452,790) Translation gain (see note 3) 62,589\begin{array}{llll}\text { Sales } & £ 2,300,000 & 1.5093 & \$ 3,471,390 \\\text { Cost of goods sold (see note } 1) & (1,200,000) && (1,837,317) \\\text { Depreciation expense see note } 2 & (240,000) & 1.8365 & (440,760)\\& (60,000) & 1.5426 & (92,556) \\\text { Other expenses } & (300,000) & 1.5093 & (452,790) \\\text { Translation gain (see note 3) } & & & 62,589\end{array} Sales Cost of goods sold (see note 1) Depreciation expense see note 2 Other expenses Translation gain (see note 3) £2,300,000(1,200,000)(240,000)(60,000)(300,000)1.50931.83651.54261.5093$3,471,390(1,837,317)(440,760)(92,556)(452,790)62,589 Comprehensive income £500,000‾$710,666‾\begin{array}{ll} \text { Comprehensive income } & \underline {£500,000 }&\underline {\$710,666} \\\end{array} Comprehensive income £500,000$710,666
Note 1:
Cost of Goods Sold OI 380,0001.5612593,256 I 1,270,0001.50931,916,811 EI (450,000)‾1.4950(672,750)‾1,200,000‾1,837,317‾\begin{array} { l l l l l } \text { Cost of Goods Sold } & \text { OI } & 380,000 \quad 1.5612 & 593,256 \\& \text { I } & 1,270,000\quad 1.5093 & 1,916,811 \\& \text { EI } & \underline { ( 450,000 ) } \quad1.4950 & \underline { ( 672,750 ) } \\& & \underline { 1,200,000 } & \underline {1,837,317} \end{array} Cost of Goods Sold OI I EI 380,0001.56121,270,0001.5093(450,000)1.49501,200,000593,2561,916,811(672,750)1,837,317 Note 2: The historical rate is the rate on the date that the subsidiary was acquired by the parent, which was January 1, 1986.
Note 2:
Gain or Loss on Net Monetary Items
£$ Opening net monetary assets (1,280,000)1.5426(1,974,528) Inflows Sales 2,300,0001.50933,471,390 Outflows Rurchases (1,270,000)1.5093(1,916,811) Other (300,000)1.5093(452,790) Dividends (200,000)‾1.4730(294,600)‾\begin{array} { l l l l l } & £ & & \$ \\\text { Opening net monetary assets } & ( 1,280,000 ) & 1.5426 & ( 1,974,528 ) \\\text { Inflows } \quad \text { Sales } & 2,300,000 & 1.5093 & 3,471,390 \\\text { Outflows } \quad \text { Rurchases } & ( 1,270,000 ) & 1.5093 & ( 1,916,811 ) \\\quad\quad\quad\quad\quad \text { Other } & ( 300,000 ) & 1.5093 & ( 452,790 ) \\\quad\quad\quad\quad\quad \text { Dividends } &\underline{ ( 200,000 ) }& 1.4730 &\underline{ ( 294,600 )}\end{array} Opening net monetary assets Inflows Sales Outflows Rurchases Other Dividends £(1,280,000)2,300,000(1,270,000)(300,000)(200,000)1.54261.50931.50931.50931.4730$(1,974,528)3,471,390(1,916,811)(452,790)(294,600)
Derived ending net monetary assets (1,167,339) Actual ending non-monetary assets (750,000)‾1.4730(1,104,750)‾ Gain on net monetary assets 62,589‾\begin{array}{llll}\text { Derived ending net monetary assets } & & & (1,167,339) \\\text { Actual ending non-monetary assets } & \underline{(750,000)} & 1.4730 & \underline{(1,104,750)} \\\text { Gain on net monetary assets } & & & \underline{62,589}\end{array} Derived ending net monetary assets Actual ending non-monetary assets Gain on net monetary assets (750,000)1.4730(1,167,339)(1,104,750)62,589
LIVERPOOLCOMPANY Statement of Changes in Equity-Partial-Retained Earnings section Year Ended December 31, 20X5£$Retained earnings - 1/1850,0001,783,774 Comprehensive in 500,000710,666 Less: Dividends (200.000)‾1.4730(294,600)‾\begin{array}{c}\text { LIVERPOOLCOMPANY }\\ \text {Statement of Changes in Equity-Partial-Retained Earnings section}\\ \text { Year Ended December 31, 20X5}\\\\\begin{array}{lcc}& £& \$ \\ \text {Retained earnings - } 1 / 1 & 850,000 & 1,783,774 \\ \text { Comprehensive in } & 500,000 & 710,666 \\ \text { Less: Dividends } & \underline{ (200.000)}\quad 1.4730 & \underline{ (294,600)} \\\end{array}\end{array} LIVERPOOLCOMPANY Statement of Changes in Equity-Partial-Retained Earnings section Year Ended December 31, 20X5Retained earnings - 1/1 Comprehensive in Less: Dividends £850,000500,000(200.000)1.4730$1,783,774710,666(294,600) Retained earnings-end£1,150,000‾$2,199,840‾\begin{array}{ll} \text { Retained earnings-end} & £ \underline { 1,150,000} &\$ \underline {2,199,840} \\\end{array} Retained earnings-end£1,150,000$2,199,840
Learning Objectives
- Determine the translation of financial statements into Canadian currency using the temporal method.
- Investigate the influence of exchange rates on the conversion of financial statements.
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