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.
Required: Prepare Stripe's:
1. Remeasurement working papers;
2. Remeasured income statement; and
3. Remeasured balance sheet.