7.4 Statement of Cash Flows Con Conversion Costless Group has a subsidiary in France, ABC Stores. ABC Stores beginning and ending trial balances, in its functional currency, the euro, are below LO 1 (in thousands) Cash....... Receivables ... Inventories Plant assets, net... Accounts payable.... Loans payable .. Capital stock ... Retained earnings, January 1... Sales revenue... Cost of goods sold.... Operating expenses....... Dr (Cr) December 31 January 1 40,000 30,000 160,000 140,000 400,000 200,000 2,000,000 1.680,000 (200,000) (150,000) (1,000,000) (600,000) (500,000) (500,000) (800,000) (800,000) (10,000,000) 6,000,000 3,900,000 Additional information in thousands): 1. Plant assets costing 1,520,000 were acquired on July 6, when the exchange rate was $1.10/. 2. Included in operating expenses is 1,200,000 in depreciation on plant assets. 3. Sales revenue, purchases, and out of pocket operating expenses were incurred evenly during the year. 4. Changes in receivables and accounts payable occurred evenly during the year. The accounts payable are amounts owed to merchandise suppliers. 5. ABC borrowed 400,000 when the exchange rate was $1.09/. 6. Other exchange rates were: January 1, $1.08/; December 31,$1.14/; average for the year, $1.12/. Required Prepare a statement of cash flows for ABC Stores, in euros, and then convert the statement into U.S. dollars. Use the direct format for the operating section of the statement, with a schedule reconciling net income to cash from operations. Include a computation of the effect of exchange rate changes on cash