Sendelbach Corporation is a U.S.-based organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto. Although this wholly owned company operates primarily in Canada, it engages in some transactions through a branch in Mexico. Therefore, the subsidiary maintains a ledger denominated in Mexican pesos (Ps) and a general ledger in Canadian dollars

(C$). As of December 31, 2011, the subsidiary is preparing financial statements in anticipation of consolidation with the U.S. parent corporation. Both ledgers for the subsidiary are as follows:

Additional Information • The Canadian subsidiary’s functional currency is the Canadian dollar, and Sendelbach’s reporting currency is the U.S. dollar. The Canadian and Mexican operations are not viewed as separate accounting entities.
• The building and equipment used in the Mexican operation were acquired in 2005 when the currency exchange rate was C$0.25 Ps 1.
• Purchases should be assumed as having been made evenly throughout the fiscal year.
• Beginning inventory was acquired evenly throughout 2010; ending inventory was acquired evenly throughout 2011.
• The Main Office account on the Mexican records should be considered an equity account. This balance was remeasured into C$7,530 on December 31, 2011.
• Currency exchange rates for 1 Ps applicable to the Mexican operation follow:

• The December 31, 2010, consolidated balance sheet reported a cumulative translation adjustment with a $36,950 credit (positive) balance.
• The subsidiary’s common stock was issued in 2004 when the exchange rate was $0.45 = C$1.
• The subsidiary’s December 31, 2010, Retained Earnings balance was C$135,530, a figure that has been translated into US$70,421.
• The applicable currency exchange rates for 1 C$ for translation purposes are as follows:

a. Remeasure the Mexican operation’s figures into Canadian dollars.

b. Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency.

c. Translate the Canadian dollar functional currency financial statements into U.S. dollars so that Sendelbach can prepare consolidated financial statements.

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Main Operation-Canada Debit Accounts payable Credit C$ 35,000 Accumulated depreciation Buildings and equipment Cash... Common stock 27,000 C$167,000 26,000 50,000 Cost of goods sold 203,000 Depreciation expense 8,000 Dividends paid, 4/1/11 28,000 Gain on sale of equipment, 6/1/11 5,000 Inventory... 98,000 Notes payable due in 2014 76,000 Receivables. 68,000 Retained earnings, 1/1/11 135,530 Salary expense 26,000 Sales 312,000 Utility expense 9,000 Branch operation 7,530 Totals C$640,530 C$640,530 Branch Operation-Mexico Accounts payable Accumulated depreciation Building and equipment Cash Depreciation expense Inventory (beginning-income statement) Inventory (ending-income statement) Inventory (ending-balance sheet) Purchases Receivables Debit Credit Ps 49,000 19,000 Ps 40,000 59,000 2,000 23,000 28,000 28,000 68,000 21,000