BOY rate	$0.22
EOY rate	$0.29
Avg. rate	$0.25
PPE purchase date rate	$0.26
LTD borrowing date rate	$0.26
Dividend rate	$0.27
Historical rate (common stock and APIC)	$0.10

Round answers to the nearest dollar. Use rounded answers for subsequent calculations. Use negative signs with answers that are reductions (COGS, expenses, dividends, cash outflows, losses, etc.).

a. Translate the subsidiarys income statement, statement of retained earnings, balance sheet, and statement of cash flows into $US (assume that the BOY Retained Earnings is $649,373).

	Subsidiary (in R$)	Translation Rate	Subsidiary (in $)
Income statement
Sales	6,510,000	Answer	Answer
Cost of goods sold	(3,906,000)	Answer	Answer
Gross profit	2,604,000		Answer
Operating expenses	(1,692,600)	Answer	Answer
Net income	911,400		Answer
Statement of retained earnings
BOY retained earnings	3,417,750		$649,373
Net income	911,400		Answer
Dividends	(91,140)	Answer	Answer
Ending retained earnings	4,238,010		Answer
Balance sheet
Assets
Cash	1,852,746	Answer	Answer
Accounts receivable	1,510,320	Answer	Answer
Inventory	1,939,980	Answer	Answer
Property, plant, and equipment, net	3,588,312	Answer	Answer
	8,891,358		Answer
Liabilities and stockholders' equity
Current liabilities	1,104,096	Answer	Answer
Long-term liabilities	2,572,752	Answer	Answer
Common stock	434,000	Answer	Answer
APIC	542,500	Answer	Answer
Retained earnings	4,238,010		Answer
Cumulative translation adjustment	-		Answer
	8,891,358		Answer
Statement of cash flows
Net income	911,400	Answer	Answer
Change in accounts receivable	(251,720)	Answer	Answer
Change in inventories	(323,330)	Answer	Answer
Change in current liabilities	184,016	Answer	Answer
Net cash from operating activities	520,366		Answer
	-
Change in PPE, net	(333,312)	Answer	Answer
Net cash from investing activities	(333,312)		Answer
Change in long-term debt	428,792	Answer	Answer
Dividends	(91,140)	Answer	Answer
Net cash from financing activities	337,652		Answer
Net change in cash	524,706		Answer
Effect of exchange rate on cash			Answer
Beginning cash	1,328,040	Answer	Answer
Ending cash	1,852,746	Answer	Answer

b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $219,711. What journal entry did the parent company make as a result of this computation?

	(in R$)	Change in rate	(in $)
BOY Net assets	Answer	Answer	Answer
Net income	Answer	Answer	Answer
Dividends	Answer	Answer	Answer
Translation adjustment for the year			Answer
BOY Cumulative Translation Adjustment			Answer
EOY Cumulative Translation Adjustment			Answer

General Journal
Description	Debit	Credit
AnswerEquity incomeEquity investmentOther comprehensive incomeOther comprehensive loss	Answer	Answer
AnswerEquity incomeEquity investmentOther comprehensive incomeOther comprehensive loss	Answer	Answer
To record translation adjustment for the year.

c. Following are selected balance sheet accounts for the parent:

Income statement									Balance sheet
Sales						$26,846,000			Assets
Cost of goods sold						(18,792,200)			Cash						$6,320,609
Gross profit						8,053,800			Accounts receivable						3,436,288
Equity income						220,350			Inventory						5,208,124
Operating expenses						(5,100,740)			Equity investment						1,581,807
Net income						$3,173,410			Property, plant, and equipment, net						27,737,287
															$44,284,115
Statement of retained earnings									Liabilities and stockholders' equity
BOY retained earnings						$21,204,636			Current liabilities						$2,150,365
Net income						3,173,410			Long-term liabilities						7,750,000
Dividends						(848,185)			Common stock						1,818,885
Ending retained earnings						$23,529,861			APIC						8,455,362
									Retained earnings						23,529,861
Statement of accum. comp. income:									Cumulative translation adjustment						579,642
BOY cumulative translation adjustment						$219,711									$44,284,115
Current-year translation gain (loss)						359,931
EOY cumulative translation adjustment						$579,642

Assume the following information: The purchase price for the subsidiary included an AAP asset relating to a Patent that the parent estimated was worth BRL300,000 more than its book value on the subsidiarys balance sheet. The patent is being amortized at the rate of BRL30,000 per year and the BOY unamortized AAP related to the Patent is BRL270,000.

1. Compute the balance of the Equity Investment account of $1,581,807 on the parents balance sheet.

Use a negative sign with answers that reduce the equity investment balance.

BOY Common stock	Answer
BOY APIC	Answer
BOY Retained earnings	Answer
BOY Unamortized AAP	Answer
BOY Cumulative translation adjustment	Answer
Equity income	Answer
Dividends	Answer
Translation adjustment	Answer
Other comprehensive income	Answer
Equity investment balance	$1,581,807

2. Compute the equity income of $220,350 reported by the parent in its income statement.

Use a negative sign with your answer, if it reduces the income.

Net income	Answer
AAP amortization	Answer
Equity income	$220,350