1. Determine the Direct and Indirect exchange rates of any two currencies on the two dates and show the impact of changes in exchange rates on Imports and Exports. (Note: You can assume any two currencies and any two dates). (2 Marks)
  • On Jan, 1 2014, Peter Corp. (a U.S. based company) formed a new subsidiary in Saudi Arabia, Saeed Inc., with an initial investment of 30,000 SAR.

Assume Saeed Inc.

Purchases inventory evenly throughout 2014. The ending inventory is purchased Nov. 30, 2014.

Uses straight-line depreciation on fixed assets.

Declares and pays dividends on Nov. 30, 2014.

Purchased the fixed assets on April 1, 2014.

Uses SAR as the functional currency.

Exchange Rates are given:

Jan 1, 2014                     0.260

April 1, 2014                  0.255

Nov. 30, 2014                0.240

Dec. 31, 2014                 0.238

REQUIRED

Prepare a schedule to translate Saeed’s financial statements on Dec. 31, 2014 to U.S. dollars.                                                                                  (2 Marks)

AccountsSAR
Cash5000
Account Receivable12000
Inventory32000
Note Receivables5000
Plant & Equipment70000
Cost of Goods sold32000
Depreciation2000
Other Expenses18000
Dividends16000
Total Debits192000
ACC. OC – Translation Adjustment (Debit) 
Adjusted Total Credit 
  
Accumulated Depreciation2000
Account Payable12000
Bonds Payable36000
Mortgage Payable46000
Common Stock30000
Sales66000
Total Credits192000
  
  • Anwar and Bravo wish to form the A&B partnership.  Anwar contributes land with a book value of $ 175,000 (current value of $200,000) and a building with a book value of $200,000 (current value of $300,000).  Bravo will contribute cash. If the partners plan to share profits and losses equally after the formation of the partnership and assuming they have agreed to equal capital contributions, how much cash will Bravo have to contribute to form the partnership? Pass Journal entry to be recorded in A&B Firm.                                                        (1 Mark)

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