Sullivan’s Island Company

Income Statement
U.S.
Pound translation rate Dollars
Rent revenue 96,000 2.04 A 195,840
Interest expense 14,000 2.04 A 28,560
Depreciation expense 20,000 2.04 A 40,800
Repair expense 4,000 2.05 H 8,200
Net income 58,000 118,280

Sullivan’s Island Company

Statement of Retained Earnings
U.S.
Pound translation rate Dollars
Retained earnings, 1/1 0 0
Net income 58,000 from I S 118,280
Dividends paid 12,000 2.08 H 24,960
Retained earnings, 12/31 46,000 93,320

Sullivan’s Island Company

Balance Sheet
U.S.
Pound translation rate
Dollars
Cash 64,000 2.08 C 133,120
Accounts receivable 16,000 2.08 C 33,280
Building 200,000 2.08 C 416,000
Accumulated depreciation 20,000 2.08 C 41,600
Total assets 260,000 540,800
Interest payable 14,000 2.08 C 29,120
Note payable 140,000 2.08 C 291,200
Common stock 60,000 2.00 H 120,000
from I
Retained earnings
46,000 R/E 93,320
to
Translation adjustment
balance 7,160
Total liabilities and equities 260,000 540,800

computation of translation adjustment

beginning net assets 0 0
increase in net assets
issued common stock 60,000 2.00 H 120,000
net income 58,000 118,280
decrease in net assets
dividends paid 12,000 2.08 H 24,960
ending net assets 31/12 106,000 213,320
ending net assets 31/12
at current exchange rate 106,000 2.08 C 220,480
translation adjustment 7,160

Sullivan’s Island Company

Statement of Cash Flow
Operating activities
Net income 58,000 118,280
(+) Depreciation 20,000 2.04 Average 40,800
(-) Increase in accounts receivables 16,000 2.04 Average 32,640
(+) Increase in interest payable 14,000 2.04 Average 28,560
Cash flow from operating 76,000 155,000
Investing activities:
Purchase of building 200,000 2.00 Historical 400,000
Financing activities:
Sale of common stock 60,000 2.00 Historical 120,000
Borrowing on note 140,000 2.00 Historical 280,000
Dividends paid 12,000 2.08 Historical 24,960
188,000 375,040
Increase in cash 64,000 130,040
Effect of exchange rate change on to
cash balance 3,080
Cash 1/1 0 0
Cash 31/12 64,000 2.08 133,120