Financial Statement Analysis & Conversion

The following report contains all the necessary transactions and financial statements for our parent company and subsidiary. The accounts are first presented in English pounds. Since the functional currency is US ($), translating the consolidated income statement and consolidated balance sheet into US dollars in necessary. All the assets will be converted at closing rate of currency and liabilities will also be converted at the date of transaction. Shareholder’s equity will be converted at the opening rate and retained earning’s opening balance will be converted at historical rate. First consolidation and eliminating entries will be made to remove the effect of dual transactions.

Consolidation Eliminating Entry | | |

Account Title | Debit | Credit |

Income from Subsidiary | 35000 |   |

Investment in subsidiary |   | 35000 |

(Loss of subsidiary transferred) |   |   |

  |   |   |

Eliminating entries |   |   |

Common Stock | 200000 |   |

Retained Earnings | 15000 |   |

Differential | 40000 |   |

Investment in Subsidiary |   | 255000 |

(Eliminating investment account) |   |   |

  |   |   |

Inventory | 20000 |   |

Depreciable asset | 70000 |   |

Bargain Purchase |   | 50000 |

Differential |   | 40000 |

(Differential allocated to assets and bargain purchase) |   |   |

  |   |   |

Sale | 10000 |   |

Cost of goods sold |   | 10000 |

( Eliminating intercompany sale of goods) |   |   |

  |   |   |

Income from subsidiary | 5000 |   |

Inventory |   | 5000 |

(Eliminating unrealized gain ) |   |   |

  |   |   |

Accounts Payable | 10000 |   |

Accounts Receivable |   | 10000 |

(Eliminating accounts receivable balance) |   |   |

  |   |   |

Long Term Notes Payable | 100,000 |   |

Long term Notes Receivable |   | 100,000 |

(Eliminating notes receivable balance) |   |   |

  |   |   |

Sales revenue | 7000 |   |...