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Husker Red Case 2

Husker Red (HR) is another subsidiary owned by Creighton Industries, a US conglomerate. HRs local currency and functional currency are the Canadian dollar. Its presentation currency is the US $. It also began operations on January 1, 2009. Financial statements for 2009 are shown below along with key exchange rates. Your job is to convert HRs financials to US$ using the appropriate method.

Currency Exchange Rates

Date	US $ / CD
January 1, 2009	$1.40 / CD
Average	$1.30 / CD
December 31, 2009	$1.20 / CD

Husker Red (in millions) Income Statement For the year ending December 31, 2009

	Canadian $	Exchange Rate	USD
Sales	2,000
COGS	1,400
Selling Expenses	100
Depreciation Expense	50
Interest Expense	30
Income Tax	42
Net Income	378

Husker Red (in millions) Balance Sheet December 31, 2009

Assets	Canadian $	Exchange Rate	USD
Cash	78
Accounts Rec.	150
Inventory	100
Total Current Assets	328
Property Plant & Equip.	800
Less: Accum. Depr	-50
Total Assets	1,078
Liabilities and Equity
Accounts Payable	100
Total Current Liabilities	100
Long-term notes payable	200
Total Liabilites	300
Capital stock	400
Retained Earnings	378
Translation Adjustment
Total	1,078

Question 1

The all-current method is appropriate in this instance because the local currency and the functional currency are the same (the Canadian $) while the presentation currency is different (the US $).

Group of answer choices

True

False

Question 2

The US $ value for the cash account is $________. Your answer should be in millions rounded to 1 decimal place. For example, 50.2 for $50.2 million.

Question 3

The appropriate rate to use for the Property, Plant and Equipment account is the historical rate of $1.40/CD$.

Group of answer choices

True

False

Question 4

HR's retained earnings is translated directly from Canadian dollars to US dollars using the current exchange rate.

Group of answer choices

True

False

Question 5

The US$ value of Retained Earnings at the end of 2009 is equal to $_______.

Question 6

The US dollar value of COGS is equal to $______.

Question 7

The cumulative translation adjustment is equal to $_______.