+1-415-670-9189
info@expertsmind.com
Calculate and journalize the foreign exchange
Course:- Accounting Basics
Reference No.:- EM13131009




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Accounting Basics

Lee Corporation Equity Scenario
Lee Corporation is an American company that began operations on January 1, 2004. It has just completed its fourth full year of operations on December 31, 2007. Ending Year Balances for the prior year that ended on December 2006 were as follows:
Retained Earnings: $ 225,000
Common Stock at par: $ 500,000
Additional Paid-in Capital: $1,000,000
Treasury Stock: $ 200,000

Income before taxes for 2007 totaled $240,000
Effective Tax Rate was 40% for all years of operation including 2007

The following information relates to 2007:

1. An error was discovered during 2007. Specifically, depreciation expense was understated in 2005 resulting in the need for a Prior Period Adjustment of $25,000 before taxes.

2. Lee Corporation changed its method of valuing inventory during 2007. The cumulative decrease in income from the change in inventory methods was $35,000 before taxes.
3. Lee Corporation declared cash dividends of $100,000 in late 2007 to be paid out in 2008.

Lee acquired a Canadian subsidiary whose sole asset is a piece of land. Lee acquired the subsidiary on 12/31/04 for the exact value of the land, CA $100,000. Lee owns 100% of the subsidiary. Go to www.x-rates.com and use the historic lookup feature to determine the exact exchange rates on 12/31/04, 12/31/05, and 12/31/06.

Requirements:

1. Prepare journal entries for items 1 to 3 above.
2. Calculate and journalize the foreign exchange adjustments for 2005, 2006 and 2007 for the Canadian subsidiary.
3. Prepare a Retained Earnings Statement for the year ended December 31, 2007.
4. Prepare a Statement of Changes in Stockholders Equity for the year ended December 31, 2007.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Accounting Basics) Materials
On 1 July 2010, Cherry Ltd acquired an item of plant for $31 864. On the same date, Cherry Ltd entered into a lease agreement with Hazel Ltd in relation to the assets. Accor
What auditing failures evident in the failure of Enron and how would these failures have contributed to the overall collapse of the company?
What required rate of return for this stock would result in a price per share of $28? If McCracken had both earnings and growth and dividened at a rate of 10% what required r
You are an investment manager who is currently managing assets worth $6 billion. You believe that active management of your fund could generate between an additional one ten
A firm had a cash balance of $52,000 at the beginning of the year. There was a net decrease in cash and cash equivalents (defined as cash inflows minus outflows during the
If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are $22, what is the break-even sales (units) if fixed costs are reduced by $30,00
You have been asked by the CEO of your company to give a presentation to the students at a local college. You were specifically asked to discuss the role of an accountant. I
Arantxa Corporation has outstanding 20,000 shares of $5 par value common stock. Prepare Arantxa's journal entries to record these transaction using the cost method.