Question

On December 31, 2017, Carter Corp. a foreign subsidiary of Barter Corp., had a bank overdraft...

On December 31, 2017, Carter Corp. a foreign subsidiary of Barter Corp., had a bank overdraft of $20,000 on one of its bank accounts. Bank overdrafts are an integral part of Carter’s cash management policy.

Prepare the journal entry to convert the foreign subsidiary from its IFRS financial statements to U.S.GAAP financial statements.

Briefly explain why this journal entry is required

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Answer #1

Journal entry to convert the foreign subsidiary from its IFRS financial statements to USGAAP financial statements is :

Debit: Cash/Bank $20,000

Credit : Short Term Liability $20000

This journal entry is required because under IFRS Bank overdrafts are treated as part of cash and cash equivalents but under USGAAP bank overdrafts are traeted as short term or current liability towards Bank.Therefore, we have to create a current liability for bank overdraft under USGAAP.

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