On January 1 2016 Safetyway Group a US company formed a Swis

On January 1, 2016, Safetyway Group, a U.S. company, formed a Swiss subsidiary, TEurope AG. The subsidiary issued all of its currently outstanding common stock on that date. Selected accounts from its balance sheets on December 31, 2016 and 2017, all of which are shown in Swiss francs (CHF), are as follows:

December 31

Additional Information:

1. Exchange rates are as follows:

2. An analysis of inventories, for which the FIFO inventory method is used, is as follows:

3. On January 1, 2016, TEurope purchased land for CHF24,000 and plant and equipment for CHF140,000. On July 4, 2017, additional equipment was purchased for CHF30,000. Plant and equipment is depreciated on a straight-line basis over a ten-year period with no salvage value. A full year’s depreciation is taken in the year of purchase.

Required

a. Prepare a schedule remeasuring the selected accounts above into U.S. dollars (the functional currency) at December 31, 2017, and December 31, 2016, respectively. Show supporting computations in good form.

b. Prepare a schedule translating the selected accounts above into U.S. dollars at December 31, 2017, and December 31, 2016, assuming the Swiss franc is the functional currency.

(in millions)	2017	2016
Accounts receivable, net	CHF 40,000	CHF 35,000
Inventories, at cost	80,000	75,000
Property, plant and equipment, net of accumulated depreciation
of CHF31,000 at December 31, 2017 and CHF14,000 at
December 31, 2016	163,000	150,000
Long-term debt	100,000	120,000
Common stock 10,000 shares authorized, issued and outstanding
5,000 shares at December 31, 2017 and December 31, 2016	50,000	50,000

Solution

a. Calculation of accounts in U.S Dollars.

Particulars

Rate on Date

Rate of Exchange

2017 / 2016

2017

2016

Accounts Receivable

Closing Rate

1.13 / 1.04

40,000 / 1.13 = 35,398.23

35,000 / 1.04 = 33,653.85

Closing Inventory

Closing Rate

1.13 / 1.04

80,000 / 1.13 = 70,796.46

75,000 / 1.04 = 72,115.38

Land

Date of purchase

0.96

25,000

24,000 / 0.96 = 25,000

Equipment

Note Below

90,541.84

132,371.80

Long-term debt

Closing Rate

1.13 / 1.04

100,000 / 1.13 = 88,495.58

120,000 / 1.04 = 115,384.62

Share Capital

Date of transaction

0.96

50,000 / 0.96 = 52,083.33

50,000 / 0.96 = 52,083.33

Note: Calculation of Equipment & Depreciation

Particulars

CHF

Rate

Amount in $

Purchase on 1^st Jan 2016

140,000

0.96

140,000 / 0.96 = 145,833.33

Depreciation

14,000

1.04

14,000 / 1.04 = 13,461.54

Closing on 31^st Dec 2016

132,371.80

Purchase on 4^th July

30,000

1.12

30,000 / 1.12 = 26,785.71

Depreciation

14,000 + 3,000 = 17,000

1.13

17,000 / 1.13 = 15,044.25

Closing Value on 31^st Dec 2017

90,541.84

Particulars	Rate on Date	Rate of Exchange 2017 / 2016	2017	2016
Accounts Receivable	Closing Rate	1.13 / 1.04	40,000 / 1.13 = 35,398.23	35,000 / 1.04 = 33,653.85
Closing Inventory	Closing Rate	1.13 / 1.04	80,000 / 1.13 = 70,796.46	75,000 / 1.04 = 72,115.38
Land	Date of purchase	0.96	25,000	24,000 / 0.96 = 25,000
Equipment	Note Below		90,541.84	132,371.80
Long-term debt	Closing Rate	1.13 / 1.04	100,000 / 1.13 = 88,495.58	120,000 / 1.04 = 115,384.62
Share Capital	Date of transaction	0.96	50,000 / 0.96 = 52,083.33	50,000 / 0.96 = 52,083.33