Note A—Balfour's investment in Tobac consists of the following:
Initial investment (33,000,000 FC X 0.55) $18,150,000
Last six months, 20X5 income (2,000,000 FC X 0.57) 1,140,000
20X7 income 2,682,363
Note B—The original loan from Balfour was 2,000,000 FC or $1,280,000 (2,000,000 FC X 0.64). On December 31, 20X7, it would require 1,969,231 FC ($1,280,000 - 0.65) to settle the loan. This represents an exchange gain of 30,769 FC (2,000,000 FC - 1,969,231 FC).
The year-end balance due to Balfour is determined as follows:
Principal balance 1,969,231 FC
Accrued interest ($1,280,000 X 8% X 9/12 - 0.65) 118,154
Balance 2,087,385 FC
The interest is accrued at year-end; therefore, interest expense should be translated at the year-end rate.
Required ► ► ► ► ► Assuming the FC is Tobac's functional currency, translate Tobac's trial balance, and prepare a consolidating worksheet.
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