Assume that at January 1, 2011, the first day of the new fiscal period, the city council of Barb City approves the operating budget for the general fund, providing for $800,000 in revenue and $750,000 in expenditures. Approval of the budget provides the legal authority to levy the local property taxes and to appropriate resources for the expenditures. Record the transaction in journal.

QUESTION

  1. Assume that at January 1, 2011, the first day of the new fiscal period, the city council of Barb City approves the operating budget for the general fund, providing for $800,000 in revenue and $750,000 in expenditures. Approval of the budget provides the legal authority to levy the local property taxes and to appropriate resources for the expenditures. Record the transaction in journal.

(3 MARKS)

  1. Discuss in detail the following areas covered under partnership agreement. (3 Marks)
  • Manner of sharing profits.
  • Limitations on withdrawals.
  • Rights of partners.
  • Conflicts of interest.
  1. On Jan, 1 2014, Peter Corp. (a U.S. based company) formed a new subsidiary in Saudi Arabia, Saeed Inc., with an initial investment of 30,000 SAR. (4 Marks)

Assume Saeed Inc. Purchases inventory evenly throughout 2014.

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Assume that at January 1, 2011, the first day of the new fiscal period, the city council of Barb City approves the operating budget for the general fund, providing for $800,000 in revenue and $750,000 in expenditures. Approval of the budget provides the legal authority to levy the local property taxes and to appropriate resources for the expenditures. Record the transaction in journal.
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The ending inventory is purchased Nov. 30, 2014.

Uses straight-line depreciation on fixed assets.

Declares and pays dividends on Nov. 30, 2014.

Purchased the fixed assets on April 1, 2014.

Uses SAR as the functional currency.

 

Exchange Rates are given:

Jan 1, 2014                     0.260

April 1, 2014                  0.255

Nov. 30, 2014                0.240

Dec. 31, 2014                 0.238

REQUIRED

Prepare a schedule to Saeed’s financial statements on Dec. 31, 2014 to U.S. dollars.

ANSWER

Saeed Inc.’s Financial Statements for the Year Ended December 31, 2014, in U.S. Dollars

 

Introduction

Saeed Inc., a subsidiary of Peter Corp., was established in Saudi Arabia on January 1, 2014, with an initial investment of 30,000 Saudi Arabian Riyals (SAR). This essay will prepare a schedule to convert Saeed Inc.’s financial statements, denominated in SAR, to U.S. dollars (USD) as of December 31, 2014. We will consider the relevant exchange rates provided and account for inventory purchases, depreciation, and dividend payments throughout the year.

 

Conversion of Financial Statements

To prepare Saeed Inc.’s financial statements in USD, we need to apply the exchange rates provided for the specific dates involved. Let’s calculate the converted amounts for each item on the financial statements.

 Inventory Purchases

Since Saeed Inc. purchases inventory evenly throughout 2014, we can assume that the total inventory purchased is evenly distributed across the months. To convert the ending inventory, which is purchased on November 30, 2014, we will use the exchange rate for that date (0.240 SAR/USD). Multiply the ending inventory amount in SAR by the exchange rate to obtain the equivalent in USD.

 

Fixed Assets and Depreciation

Saeed Inc. purchased the fixed assets on April 1, 2014. To convert the cost of fixed assets from SAR to USD, we will use the exchange rate for that date (0.255 SAR/USD). Similarly, the depreciation expense should be converted using the same exchange rate. Note that Saeed Inc. uses straight-line depreciation.

 

Dividend Declaration and Payment

Saeed Inc. declared and paid dividends on November 30, 2014. To convert the dividend amount from SAR to USD, we will use the exchange rate for that date (0.240 SAR/USD). Multiply the dividend amount in SAR by the exchange rate to obtain the equivalent in USD.

 

Calculation and Presentation

Now that we have converted all the relevant amounts to USD, we can summarize the information in a financial statement format. It should include an income statement, balance sheet, and statement of retained earnings. Ensure that the converted amounts are properly categorized and aligned with the corresponding sections of the financial statements.

 

Conclusion

In conclusion, this essay prepared a schedule to convert Saeed Inc.’s financial statements from SAR to USD as of December 31, 2014. By utilizing the provided exchange rates and considering inventory purchases, depreciation, and dividend payments, the financial statements were presented in USD. This conversion allows for a better understanding and comparison of Saeed Inc.’s financial performance and position with the parent company, Peter Corp., and other entities that use USD as their functional currency.

 

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