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Cash Flow Statements of Fenwicke Company

Question

Fenwicke Company organized and began operating a subsidiary in a foreign country on January 1, 2015, by investing LCU 68,000. This subsidiary immediately borrowed LCU 170,000 on a five-year note with 6 percent interest payable annually beginning on January 1, 2016. The subsidiary then purchased for LCU 238,000 a building that had a 10-year anticipated life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, the subsidiary rents the building for three years to a group of local doctors for LCU 4,500 per month. By year-end, payments totaling LCU 45,000 had been received. On October 1, LCU 3,800 was paid for a repair made on that date. The subsidiary transferred a cash dividend of LCU 5,300 back to Fenwicke on December 31, 2015. The functional currency for the subsidiary is the LCU. Currency exchange rates for 1 LCU follow:

JANUARY 1 2015

$ 2.30

1 LCU 

OCTOBER 1,2015

2.15

1 LCU

AVERAGE FOR 2015

$ 2.10

1 LCU

DECEMBER 31,2015

$ 1.90

1 LCU

Prepare a statement of cash flows in LCU for Fenwicke’s foreign subsidiary and then translate these amounts into U.S. dollars. (Amounts to be deducted and cash outflows should be indicated with minus sign.)

Summary

This question belongs to finance and discusses about statement of cash flows of Fenwicke Company.

Word count: NA

 

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