1. ABC Company has a foreign subsidiary in Mexico that it established on Jan 1,2018. To start this business, ABC Company invests 100,000 pesos. It spent 20,000 pesos immediately to acquire equipment. On May 1, 2018, it purchases land for 30,000 pesos. All subsidiary operational activities occur evenly throughout the year. The U.S. dollar ($) exchange rates for the peso for 2018 are below As of December 31, 2018, the subsidiary reports the following trial balance:
In Pesos
Debits 30,000 15,000 20,000
Credits
Cash Accounts Receivable Equipment Accumulated depreciation Land Accounts Payable Common Stock Dividends declared (6/1/18) Sales Salary expense depreciation expense Misc expenses Totals
4,000
30,000
5,000 100,000
20,000
40,000
20,000 4,000 10,000 149,000
149,000
ABC company is based in Oklahoma City and uses the U.S. dollar as its reporting currency.
a. Assume that the subsidiary's function currency is the peso. Prepare a trial balance for it in U.S. dollars so that 2018 consolidated financial statements can be prepared. b. Assume that the subsidiary's function currency is the U.S. dollar. Prepare a trial balance for it in U.S. dollars so that 2018 consolidated financial statements can be prepared.
