5 note to instructor this exam item is similar to exercise 3 except that the exchang 4307458

5 note to instructor this exam item is similar to exercise 3 except that the exchang 4307458

5) Note to Instructor: This exam item is similar to Exercise 3 except that the exchange rates have been changed and the temporal method is used instead of the current rate method.

The Polka Corporation, a U.S. corporation, formed a British subsidiary on January 1, 2011 by investing 550,000 British pounds (£) in exchange for all of the subsidiary's no-par common stock. The British subsidiary, Stripe Corporation, purchased real property on April 1, 2011 at a cost of £500,000, with £100,000 allocated to land and £400,000 allocated to the building. The building is depreciated over a 40-year estimated useful life on a straight-line basis with no salvage value. The U.S. dollar is Stripe's functional currency, but it keeps its records in pounds. The British economy does not experience high rates of inflation. Exchange rates for the pound on various dates are:

January 01, 2011=1£=$1.60

April 01, 2011=1£=$1.62

December 31, 2011=1£=$1.65

2011 average rate=1£= $1.64

Stripe's adjusted trial balance is presented below for the year ended December 31, 2011.

In Pounds

Debits:

Cash£ 200,000

Accounts receivable72,000

Notes receivable99,000

Building400,000

Land100,000

Depreciation expense7,500

Other expenses115,000

Salary expense208,000

Total debits£1,201,500

Credits

Accumulated depreciation£7,500

Accounts payable100,000

Common stock550,000

Retained earnings0

Equity adjustment0

Sales revenue544,000

Total credits£1,201,500

Required: Prepare Stripe's:

1. Remeasurement working papers;

2. Remeasured income statement; and

3. Remeasured balance sheet.

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