On January 1, 2024, WILL Corporation organized SERFORT Company as a subsidiary in Hong
Kong with an initial investment cost of HK$150,000. SERFORT December 31, 2024 Trial Balance,
in Hong Kong Dollar (HK$), is as follows:
DEBIT CREDIT
Cash 10,500
Accounts Receivable (net) 30,000
Receivable from WILL Corp. 7,500
Inventory 37,500
Plant & equipment 150,000
Accumulated Depreciation 15,000
Accounts payable 18,000
Bonds payable 75,000
Ordinary Share 90,000
Sales 225,000
Cost of Sales 105,000
Depreciation expenses 15,000
Operating expenses 45,000
Dividends paid 22,500
423,000 423,000
Additional Information:
Purchases of inventory goods are made evenly during the year. Items in ending inventory were
purchased November 1. Equipment is depreciated by straight-line method with a 10-year life and
no residual value. A full year’s depreciation is taken in the year of acquisition. The equipment was
acquired on March 1. The dividends were declared and paid on November 1. Exchange rates
were as follows:
HK$ PHP
January 1 1.00 3.80
March 1 3.50
November 1 1.00 3.60
December 31 1.00 3.00
Average for the year 3.30
Average or the last 2 months 3.40
Requirements:
Using the current rate method:
1. Prepare the translated Income Statement and Balance Sheet as of December 31, 2024.
2. How much is the cumulative translation adjustment gain/loss?
Using the Temporal Method:
1. Prepare the translated Income Statement and Balance Sheet as of December 31, 2024.
2. How much is the cumulative translation adjustment gain/loss?
