Assume that our company (U.S. firm) owns a subsidiary operating in United Kingdom. The subsidiary has adopted the British pound (GBP) as its functional currency. Following are the subsidiary's financial statements (in GBP) for the most recent year: Subsidiary (in GBP) Income statement: Sales Revenue CGS Operating expenses Depreciation Net income 9,600 (6,120) (1,788) (486) 1,206 Statement of retained earnings: Retained Earnings - Beg Net income Dividends Retained earnings - End 5,538 1,206 (142) 6,602 Balance sheet: Assets Cash Receivables Inventories Property plant & equipment - net Total Assets 2,460 2,491 2,239 5,749 12,940 - Beg Balance Liabilities and Stockholders' Equity Current Liabilities Long-term Liabilities Common Stock Additional Paid-in-Capital Retained Earnings Total Liabilities & Equity Ending Balance 1,638 3,175 420 1,104 6,602 12,940 4,155 continued next page Our subsidiary also reports the following additional financial statement information: Inventory - Beg Purchases Inventory - End Cost of Goods Sold In Pounds (GBP) 2,312 6,047 (2,239) 6,120 Land Building Accumulated Depreciation-Building Equipment Accumulated Depreciation Equipment Property Plant and Equipment, net 2,269 4,200 (2,100) 2,760 (1,380) 5,749 Depreciation expense-Building Depreciation expense-Equipment Depreciation expense 210 276 486 The relevant exchange rates for the $US value of the Euro (GPB) are as follows: Beg Period Rate (Jan 1) End Period rate (Dec 31) Annual Average rate Dividend Declaration date rate $ 1.60 $ 1.80 $1.70 $1.76 Historical rates: Inventory - Beg Land Building Equipment Historical rate (stockholder's equity other than RE) $1.60 $1.20 $1.20 $1.50 $1.20 Required: Convert the subsidiary's income statement, statement of retained earnings, and balance sheet into US dollars for the current year. Use the template provided below. If needed, you can insert new rows or delete rows if not needed (or not relevant) Answer Template Which method did I use? Please Circle On (Current Rate Method vs. Temporal Method) Subsidiary (in GBP) Translation Rate Subsidiary (in $) Income statement: Sales Cost of goods sold Operating expenses Depreciation Translation gain or loss Net income Statement of retained earnings: Retained earnings - Beg Net income Dividends Retained earnings - End Subsidiary (in GBP) Translation Rate Subsidiary (in $) Balance sheet: Assets Cash Accounts receivable Inventory PPE, net Total Assets Liabilities and Stockholders' Equity Current Liabilities Long-term Liabilities Common Stock Additional Paid in Capital Retained Earnings Cumulative Translation Adjustment Total Liabilities & Equity Assume that our company (U.S. firm) owns a subsidiary operating in United Kingdom. The subsidiary has adopted the British pound (GBP) as its functional currency. Following are the subsidiary's financial statements (in GBP) for the most recent year: Subsidiary (in GBP) Income statement: Sales Revenue CGS Operating expenses Depreciation Net income 9,600 (6,120) (1,788) (486) 1,206 Statement of retained earnings: Retained Earnings - Beg Net income Dividends Retained earnings - End 5,538 1,206 (142) 6,602 Balance sheet: Assets Cash Receivables Inventories Property plant & equipment - net Total Assets 2,460 2,491 2,239 5,749 12,940 - Beg Balance Liabilities and Stockholders' Equity Current Liabilities Long-term Liabilities Common Stock Additional Paid-in-Capital Retained Earnings Total Liabilities & Equity Ending Balance 1,638 3,175 420 1,104 6,602 12,940 4,155 continued next page Our subsidiary also reports the following additional financial statement information: Inventory - Beg Purchases Inventory - End Cost of Goods Sold In Pounds (GBP) 2,312 6,047 (2,239) 6,120 Land Building Accumulated Depreciation-Building Equipment Accumulated Depreciation Equipment Property Plant and Equipment, net 2,269 4,200 (2,100) 2,760 (1,380) 5,749 Depreciation expense-Building Depreciation expense-Equipment Depreciation expense 210 276 486 The relevant exchange rates for the $US value of the Euro (GPB) are as follows: Beg Period Rate (Jan 1) End Period rate (Dec 31) Annual Average rate Dividend Declaration date rate $ 1.60 $ 1.80 $1.70 $1.76 Historical rates: Inventory - Beg Land Building Equipment Historical rate (stockholder's equity other than RE) $1.60 $1.20 $1.20 $1.50 $1.20 Required: Convert the subsidiary's income statement, statement of retained earnings, and balance sheet into US dollars for the current year. Use the template provided below. If needed, you can insert new rows or delete rows if not needed (or not relevant) Answer Template Which method did I use? Please Circle On (Current Rate Method vs. Temporal Method) Subsidiary (in GBP) Translation Rate Subsidiary (in $) Income statement: Sales Cost of goods sold Operating expenses Depreciation Translation gain or loss Net income Statement of retained earnings: Retained earnings - Beg Net income Dividends Retained earnings - End Subsidiary (in GBP) Translation Rate Subsidiary (in $) Balance sheet: Assets Cash Accounts receivable Inventory PPE, net Total Assets Liabilities and Stockholders' Equity Current Liabilities Long-term Liabilities Common Stock Additional Paid in Capital Retained Earnings Cumulative Translation Adjustment Total Liabilities & Equity