Exercise 18-06 Financial statement effects of translation (LO 18-6) United Company has two foreign subsidiaries. Cancorp and Britcorp. Cancorp operates in Canada and Britcorp operates in the United Kingdom. Both companies are 100% owned by United Company and their financial statements are translated into US dollars using the current rate method. United has no other foreign subsidiaries. The following are local currency partial income statements for the two foreign subsidiaries. All income statement amounts occurred evenly through the year, Cancorp (in millions of Canadian dollars) Sales Cost of sales other expenses Operating income 20x2 28X1 C$ 500 C$465 (400) (370) (25) (18) CS 75 CS 77 Britcorp (in millions of British pounds) Sales cost of sales other expenses Operating income 2ex2 2exa E tee E 525 (430) (385) (38) (28 E 140 E 112 During 20x2 the Canadian dollar appreciated against the U.S. dollar while the Brush pound fell in value against the dollar. Your assistant neglected to provide you actual exchange rates, but instead gave the following information on the percentage change in each of the exchange rates against the U.S. dollar Canadian Dollar Year-end exchange rate 2ex2/Year-end exchange rate zexi 110x Average exchange rate 20x2/Average exchange rate 2exi 100% British Pound: Year-end exchange rate 2ex2/Year-end exchange rate 2exi Average exchange rate 20x2/Average exchange rate zexi 85% sex In other words, the December 31, 20x2. value of one Canadian dollar as stated in US dollars divided by the corresponding value at December 31, 20x1, was 110. Indicating a 10% Increase in the value of the Canadian dollar over the course of the year. Required: 1 What sales growth percentages (20X2V. 20x1) will be reported for Cancorp, based on both its Canadian dollar income statements and its US dollar income statements after translation? 2. For 20X2, what operating margin percentages (operating income sales) will be reported for Bitcore, in both its British pound income statement and its US dollar Income statement after translation? Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. Required 1 Required 2 For 20x2, what operating margin percentages (operating income/sales) will be reported for Britcorp, in both its British pound income statement and its U.S. dollar income statement after translation? (Round your percentage answers to 2 decimal places Operating Margin % British pound TUIS dollar % Complete this question by entering your answers in the tabs below. Required 1 Required 2 For 20x2, what operating margin percentages (operating income/sales) will be reported for Britcorp, in both its British pound income statement and its U.S. dollar income statement after translation? (Round your percentage answers to 2 decimal places Operating Margin % British pound TUIS dollar %
