Part B: For this question, assume the U.S. dollar is the fun…
Part B: For this question, assume the U.S. dollar is the functional currency. On January 1, 2058, Scarlet Witch Corp., a U.S. company, acquired all of the outstanding stock of Quicksilver PLC, a British company, at underlying book value of $350,000. Quicksilver’s trial balance on December 31, 2058, in pounds (£), is shown in parts (a) and (b) below. The following additional information is available: Quicksilver uses the FIFO method for its inventory. The beginning inventory was acquired on January 1, 2058, and ending inventory was acquired on December 26, 2058. Purchases of £300,000 were made evenly throughout 2058. Quicksilver acquired all of its property, plant, and equipment on December 31, 2057, and uses straight-line depreciation. Quicksilver’s sales were made evenly throughout 2058, and its operating expenses were incurred evenly throughout 2058. The dividends were declared and paid on November 1, 2058. On December 31, 2057, retained earnings in U.S. dollars was $187,500 (applicable exchange rate of £1 = $1.25). Exchange rates were as follows: Required: Complete the “Exchange Rate” column in the following schedules, indicating the applicable rate necessary to convert Quicksilver’s trial balance from British pounds into U.S. dollars. If any rate is a mixed rate, enter “Mixed” in the exchange rate column. For Cost of Goods Sold and Retained Earnings, calculate and enter the appropriate balances in U.S. Dollars. No other balances need to be calculated. Quicksilver PLC Trial Balance (December 31, 2058) Balance (pounds £) Exchange Rate Balance (Dollars $) Cash £70,000 Accounts Receivable (net) 100,000 Inventory 120,000 Property, Plant, and Equipment 330,000 Cost of Goods Sold 270,000 Operating Expenses 60,000 Depreciation Expense 30,000 Dividends Paid 10,000 TOTAL DEBITS £990,000 Accumulated Depreciation £120,000 Accounts Payable 110,000 Notes Payable 90,000 Common Stock 100,000 Retained Earnings 150,000 Sales 420,000 TOTAL CREDITS £990,000