Assume that our subsidiary reports the following financial statements in Euros ():

14

Income statement:

Sales Cost of goods sold Gross Profit Operating expenses Net income

Statement of retained earnings:

BOY retained earnings Net income Dividends Ending retained earnings

Balance sheet:

Assets Cash Accounts receivable Inventory PPE, net Total Assets

Liabilities and Stockholders Equity Current Liabilities Long-term Liabilities Common Stock

APIC Retained Earnings Total Liabilities & Equity

Subsidiary (in )

1,500,000 (900,000)

600,000 (390,000) 210,000

787,500 210,000

(21,000) 976,500

426,900 348,000 447,000 826,800

2,048,700

254,400 592,800 100,000 125,000 976,500

2,048,700

$1.40

$1.50 $1.45 $1.30 $1.20 $1.42 $0.65

Also assume the following exchange rates ($:1):

Beginning of Year (BOY) Rate End of Year (EOY) rate Avg. rate PPE purchase date rate

Long term debt borrowing date rate Dividend rate Historical rate (Common Stock and APIC)

Instructions: Translate the subsidiarys income statement and balance sheet into $US using the current-rate method, assuming a BOY Retained Earnings balance of $786,624. Write your answers in the space below: