On January 2, 2011, Promo Inc., a U.S. parent company, purchased a 100% interest in Spot Company, a subdivision located in Switzerland. The purchase method of accounting was used to account for the acquisition. The 2011 financial statements for Spot Company, the subsidiary, in Swiss francs were as follows:
Comparative Balance Sheets
Jan. 2 Dec. 31
Cash 15,000 33,000
Accounts receivable 45,000 49,500
Plant and equipment (net) (purchased 6/30/08) 75,000 67,500
Land (purchased 6/30/08) 45,000 45,000
Total 180,000 195,000
Accounts payable 13,500 18,000
Long-term notes payable (issued 6/30/08) 31,500 27,000
Common stock (issued 6/30/08) 90,000 90,000
Retained earnings 45,000 60,000
Total 180,000 195,000
Income Statement
Revenues 180,000
Operating expenses including depreciation
of 7,500 francs
135,000
Net income 45,000
Beginning retained earnings 45,000
Dividends declared and paid 90,000
30,000
Ending retained earnings 60,000
Sales were earned and operating expenses were incurred evenly during the year.
Exchange rates for the franc at various dates are:
January 2, 2011 0.8600
December 31, 2011 0.8830
Average for 2011 0.8715
December 10, 2011, dividend payment date 0.8810
June 30, 2008 0.8316
Use the above information to answer the following question:
Translate the year-end financial statements of Spot Company, the foreign subsidiary, using the temporal method and Prepare a schedule to compute the translation gain or loss for Spot Company, assuming the temporal method of translation. Round numbers to the nearest dollar.