9. Brouhaha Mechanics is a US-based corporation that sells mechanical engines and components used by electric utilities. Its Canadian subsidiary, Hubbub Motors, operates solely in Canada. It was created on 31 December 2016, and Brouhaha Mechanics determined at that time that Hubbub should use the US dollar as its functional currency. Chief Financial Officer Frotty Ainsman was asked to explain to the board of directors how exchange rates affect the financial statements of both Hubbub Motors and the consolidated financial statements of Brouhaha Mechanics. For the presentation, Ainsman collects Hubbub's balance sheets for the years ended 2016 and 2017 (Exhibit 1), as well as relevant exchange rate information (Exhibit 2). Exhibit 1: Hubbub Motors condensed balance sheet for fiscal years ending 31 December (CAD millions) Account Cash Accounts receivable Inventory Fixed assets Accumulated depreciation Total assets Accounts payable Long-term debt Common stock Retained earnings 2017 135 98 77 100 (10) 400 77 175 100 48 Total liabilities and shareholder's 400 equity Exhibit 2: Exchange rate information Rate on 31 December 2016 Average rate in 2017 Weighted-average rate for inventory purchases Rate on 31 December 2017 2016 167 30 100 297 22 175 100 297 USD/CAD 0.86 0.92 0.92 0.95 a. After translating Hubbub's inventory and long term debt into the parent company's currency (USD), calculate the amounts for inventory and long term debt reported on Brouhaha Mechanics' financial statements on 31 December 2017 in millions of USD. (Show all your workings to receive full credit. Write down your answer accurate to 2 decimal places.) [2 marks] b. After translating Hubbub's 31 December 2017 balance sheet into the parent company's currency (USD), calculate the translated value of retained earnings in millions of USD. (Show all your workings to receive full credit. Write down your answer accurate to 2 decimal places.) [5 marks] c. Explain whether there would be any translation effects for Brouhaha Mechanics with regard to monetary and non-monetary assets and liabilities if the functional currency of Hubbub Motors were changed to the Canadian dollar. [2 marks] d. Explain why a change in the functional currency of Hubbub Motors to the Canadian dollar would impact the fixed asset turnover ratio (i.e. sales/fixed assets) of Brouhaha Mechanics. [2 marks] 2

9. Broxhaha Mechanics is a US-based corporation that sells mechanical engines and components zsed by electric ueilities. las Cmafim subsidiary. Hubbub Motons, operates solely in Canada. It was created oe 31 December 2016, asd Brouhala Mechanics determined at that time that Hubbub should we the US dollar as its fiunctional earrency. Chief Financial Officer Frotty A inumun was aled to explain to the board of directors how exchange nates affect the financial statenerts of both Hubbub Moton and the consolidated financial statements of Brovhaha Mectanics. For the presentation, A insman collects Hebbub's halunce sherts for the yean ended 2016 and 2017 (Evhibit i), ar well at relevant exchange rute information (Exhibit 2 ). 2 Futibit I: Hubbub Motos condenied bulance ibeet for fiscal yean ending 31 December (CAD milliose) Echibin 2- Fichanes rate informution decinal pilices) [2 mals] [R maikes]