Assume that your company owns a subsidiary operating in Germany. The subsidiary conducts most of its business activities in the European Economic Union and maintains it books in the Luro as its functional currency. The subsidiary's financial statements (ine) for the prior and most recent years are below. The relevant exchange rates for the $US value of the Euro () are as follows: BOY EDY rate Avg. rate Prior Year Current Year $1.29 $1.21 $1.21 $1.15 $1.25 $1.18 $1.17 $1.17 Dividend rate Historical rate (common stock and APIC) $1.22 $1.41 $1.16 51.41 PPE purchase date rate LTD barrowing date rate a. Translate the subsidiary's income statement, statement of retained earnings, and balance sheet into SUS for both years (assume that the BOY Retained Earnings for the prior year is $780,000). Instructions: Round translated answers to the nearest whole number. Use negative signs with answers that are reductions (COGS, expenses, dividends, cash outflows, losses, etc.). Prior Year Income Statement Sales Cost of goods sold Gross Prof Operating expenses (In) 3,250,000 S (1,950,000 $ 1,300,000 (845,000) 5 Translation Rate (In $) 1254,062,500 125 1.25 Net income 455,000 (2,437,500) 1,625,000 (1,056,250) S 568,750 Statement of retained earnings: BOY retained earnings 1,638,000 $780,000 Net income 455,000 568,750 Dividends (45,500) $ 122 (55,510) Ending retained earnings 2,047,500 S 1,293,240 Balance sheet: Assets Cash 413,920 5 Accounts receivable 754,000 $ 1215 121 500,843 912,340 Inventory 968,500 $ 121 1,171,885 PPE, Total ass Liabilities and stockholders' equity Current liabilities Long-Term liabilitie 2,331,680 5 121 2,821,333 4,468,100 5 5,406,401 551,200 5 1215 666,952 1,284,400 5 121 1,554,124 Common Stock 260,000 $ 141 366,600 APIC 325,000 $ 141 458,250 Retained earnings 2,047,500 1,293,240 Cumulative translation adjustment 1,067,235 Total liabilities & equity 4,468,100 5,406,401 Current Year Income Statement: Sales Cost of goods sold Gross prof Operating expenses (In 3,900,000 $ (2,340,000) $ 1,560,000 Translation Rate (In $) 1.185 1.18 4,602,000 (2,761,200) 1,840,800 (1,014,000) $ 1.18 (1,196,520) 546,000 644,280 Net income Statement of retained earnings BOY retained earnings 2,047,500 $ 1,293,240 Net income 546,000 644,280 Dividends (54,600) $ 1.16 (63,336) Ending retained earrings 2,538,900 1,874,184 Balance sheet Assets Cash 1,109,940 $ 1.15 $ 1,276,431 Accounts receivable 904,800 $ Inventory 1,162,200 $ PPE, 2,149,680 $ 1.15 1.15 1.15 1,040,520 1,336,530 2,472,132 5,326,620 6,125,613 Total Liabilities and stockholders' equity Current liabilities Long-term liabilities Common stock APIC 661,440 $ 1,541,280 $ 260,000 $ 325,000 $ 1.15 $ 1.15 1.41 1.41 Retained earnings 2,538,900 760,656 1,772,412 366,600 458,250 1,874,184 Accounts receivable Inventory PPE, Total assets Liabilities and stockholders' equity Current liabilities Long-term liabilities 904,800 $ 1.15 1,040,520 1,162,200 $ 1.15 2,149,680 $ 1.15 1,336,530 2,472,132 5,326,620 $ 6,125,613 Common stock APIC Retained earnings Cumulative translation adjustment 661,440 $ 1.15 $ 1,541,280 1.15 760,656 1,772,472 260,000 $ 1.41 366,600 325,000 $ 1.41 458,250 2,538,900 1,874,184 893,451 Total liabilities & equity 5,326,620 $ 6,125,613 Statement of cash flows Net income 546,000 644,280 Change in accounts receivable (150,800) $ 1.18 (177,944) Change in inventories (193,700) $ 1.18 (228,566) Change in current liabilities 110,240 $ 1.18 130,083 Net cash flows from operating activities 311,740 367,853 Change in PPE, net Net cash flows from investing activities Change in long-term debt 182,000 $ 1.17 212,940 182,000 580,793 x 256,880 $ 1.17 300,550 Dividends (54,600) $ 1.16 163,336) Net cash flows from financing activities 202,280 818,007 Net change in cash 696,020 Effect of exchange rate on cash Beginning cash 413,920 $ 1.21 Ending cash 1,109,940 $ 500,843 1.15 1,276,431 b. Compute the ending Cumulative Translation Adjustment directly for the current year. Note:Use negative signs with answers, when appropriate. Direct computation of translation adjustment BOY Net assets x EOY-BOY Exchange rate Net incomex EOY-Axg. Exchange rates Dividends EOY-Dividend Exchange rates BOY Cumulative Translation Adjustment EDY Cumulative Translation Adjustment x x x x 0x