Corp, a US-based company, created a subsidiary, Napigkit Inc., in the Philippines to export pure sap coco sugar on Jan 1. Year 1, by investing 3,000,000 Philippine pisos (PHP) when the exchange rate was USD $0.09 / PHP 1. On that date, the foreign subsidiary borrowed PHP 5,000,000 from local banks on a 10-year note to finance the acquisition of PPE. The sub's opening balance sheet in PHP was: Napigkit Inc. Balance Sheet January 1, Year 1 Cash P3,000,000 Long-term debt P5,000,000 PPE 3,000,000 5,000,000 Stock P8.000.000 P8,000,000 TOTAL . During the year, the subsidiary generated sales of PHP 10,000,000 and net income of PHP 1,100,000. It declared dividends on June 1 and December 1. 2 dividends off 200,000 Inventory was acquired evenly throughout the year, with ending inventory acquired on Nov 1, Y1. See next page for financial statements in PHP. For year ended December 31, Year 1 Sales P10,000,000 Cost of Goods Sold (6.000.000) Gross profit 4,000,000 Depreciation expense 500,000 Other operating expenses 1,500,000 Income before tax 2,000,000 Income taxes 900.000 Net Income P1.100.000 Napigkit Inc. Statement of Retained Earnings For year ended December 31, Year 1 Retained earnings, 1/1/41 P 0 Net Income 1,100,000 Dividends (400.000) Retained Earnings, 12/31/41 P 700.000 Cash Receivables Inventory PPE (net) TOTAL ASSETS Napigkit Inc. Balance Sheet December 31, Year 1 P 800,000 Accounts payable 1,500,000 Long-term debt 2,700,000 Common stock 4.500.000 Retained earnings P9.500.000 P800,00 5.000.00 3,000,00 700.0 29.500.0 Relevant exchange rates for Year 1 are (USD per PHP): January 1, Y1 USD 0.090 June 1, Y1 0.095 Average for year 1 0.096 November 15, Y1 0.100 December 1, Y1 0.105 December 31, Y1 0.110 7-1a. Translate Napigkit Inc's financial statements into USD, assuming the Phillipine piso is the functional currency. 7-1b. Compute the translation adjustment by considering the impact of exchange rate changes on the subsidiary's net assets. NO corkant too 7-2a. Remeasure Napigkit Inc's financial statements into USD, assuming that the USD is the functional currency. 7-2b. Compute the remeasurement gain or loss by considering the impact of exchange rate changes on the subsidiary's net monetary asset or liability position. Corp, a US-based company, created a subsidiary, Napigkit Inc., in the Philippines to export pure sap coco sugar on Jan 1. Year 1, by investing 3,000,000 Philippine pisos (PHP) when the exchange rate was USD $0.09 / PHP 1. On that date, the foreign subsidiary borrowed PHP 5,000,000 from local banks on a 10-year note to finance the acquisition of PPE. The sub's opening balance sheet in PHP was: Napigkit Inc. Balance Sheet January 1, Year 1 Cash P3,000,000 Long-term debt P5,000,000 PPE 3,000,000 5,000,000 Stock P8.000.000 P8,000,000 TOTAL . During the year, the subsidiary generated sales of PHP 10,000,000 and net income of PHP 1,100,000. It declared dividends on June 1 and December 1. 2 dividends off 200,000 Inventory was acquired evenly throughout the year, with ending inventory acquired on Nov 1, Y1. See next page for financial statements in PHP. For year ended December 31, Year 1 Sales P10,000,000 Cost of Goods Sold (6.000.000) Gross profit 4,000,000 Depreciation expense 500,000 Other operating expenses 1,500,000 Income before tax 2,000,000 Income taxes 900.000 Net Income P1.100.000 Napigkit Inc. Statement of Retained Earnings For year ended December 31, Year 1 Retained earnings, 1/1/41 P 0 Net Income 1,100,000 Dividends (400.000) Retained Earnings, 12/31/41 P 700.000 Cash Receivables Inventory PPE (net) TOTAL ASSETS Napigkit Inc. Balance Sheet December 31, Year 1 P 800,000 Accounts payable 1,500,000 Long-term debt 2,700,000 Common stock 4.500.000 Retained earnings P9.500.000 P800,00 5.000.00 3,000,00 700.0 29.500.0 Relevant exchange rates for Year 1 are (USD per PHP): January 1, Y1 USD 0.090 June 1, Y1 0.095 Average for year 1 0.096 November 15, Y1 0.100 December 1, Y1 0.105 December 31, Y1 0.110 7-1a. Translate Napigkit Inc's financial statements into USD, assuming the Phillipine piso is the functional currency. 7-1b. Compute the translation adjustment by considering the impact of exchange rate changes on the subsidiary's net assets. NO corkant too 7-2a. Remeasure Napigkit Inc's financial statements into USD, assuming that the USD is the functional currency. 7-2b. Compute the remeasurement gain or loss by considering the impact of exchange rate changes on the subsidiary's net monetary asset or liability position
