On 1/1/1990 the Auf Wiederschen Company was founded in Munich, Germany. This company makes those "We're #1" sponge hands that fans bring to football games. On 1/1/2005 Harry Potter was hired as the CEO of the company at the same time that it adopted IFRS. On 1/1/2010 The American Company Hogswart purchased all of the shares of Auf Weiderschen. On 1/1/2009, 1 Euro = $1.55. On 7/1/2010, when Auf Wiederschen purchased land, 1 Euro = $1.65. On 1/1/2010, when Auf Wiederschen purchased equipment with a 10 year life and no salvage; 1 Euro = $1.35. On 12/31/10, Auf Wiederschen's retained earnings was $55,000. The average exchange rate for 2011 was 1 Euro = $1.40. The exchange rate on 12/31/2011 was 1 Euro = $1.30. On 10/1/2011, when Auf Wiederschen paid a dividend; 1 Euro = $1.42.

The 2011 financial statements for Auf Wiederschen are given below (in Euros but under GAAP)

2011 income statement

2011 Statement of Retained Earnings

Balance Sheet 12/31/2011

REQUIRED

A.) IF THE DOLLAR IS FUNCTIONAL, PREPARE THE STATEMENTS IN DOLLARS.

B.) IF THE EURO IF FUNCTIONAL, PREPARE THE STATEMENTS IN DOLLARS.

Hogswart has decided in 2011 to begin rewarding executives with bonuses.

Below are the incomes of Auf Weiderschen for the past 3 years using different accounting methods.

C.) If you are Harry Potter, what method of accounting do you believe should be used in determining your bonus? DEFEND YOUR ANSWER

D.) If you are Dumbledoor, head of Hogswart, what accounting method do you think should be used to evaluate Potter? DEFEND YOUR ANSWER