Foreign Currency Accounting Facts: Parent Co, a U.S. firm, paid $525,000 cash to acquire all of the stock of the British firm Sub Co when the book value of Sub's net assets was equal to fair value. This business combination occurred on December 31, 2021, when the exchange rate for British pounds was $1.50. During 2022 the British pound weakened against the U.S. dollar, resulting in a year- end current exchange rate of $1.44. Average exchange rates for 2022 were $1.48. Sub Co paid a $30,000 dividend to Parent Co on December 1, 2022 when the exchange rate was $1.46 per British pound. The only intercompany transaction between the firms was an $84,000 (656,000) noninterest-bearing advance by Sub Co to Parent Co that occurred on January 4, 2022 when the exchange rate was still $1.50. The advance is denominated in U.S. dollars. Sub Co's functional currency is British pounds, so the advance to Parent Co is a foreign currency transaction from Sub Co's perspective, but not to Parent Co because it is denominated in U.S. dollars. Sub Co's assets, liabilities and stockholder's equity at acquisition (i.e., December 31, 2021) were as follows: British Exchange U.S. Pounds Rate Dollars Assets Cash E140,000 $1.50 $210,000 Accounts receivable 40,000 1.50 60,000 Inventory 120,000 1.50 180,000 Plant assets 100,000 1.50 150,000 Less: Accumulated depreciation (20,000) 1.50 (30,000) Total assets E380,000 $570,000 Liabilities & Stockholder's Equity Accounts payable E30,000 $1.50 $45,000 Bonds payable 100,000 1.50 150,000 Common stock 200,000 1.50 300,000 Retained earnings 50,000 1.50 75,000 Total liabilities & stockholder's equity E380,000 $570,000 Sub Co adjusted its advance to Parent Co at year-end 2022 to reflect the $1.44 current exchange rate. Sub Co recorded an exchange gain because there is no evidence that the advance is of a long-term investment nature. The entry recorded on Sub Co's books was: DR CR Advance to parent E2,333 Exchange gain E2,333 To adjust receivable denominated in U.S. dollars (($84,000 / $1.44) - E56,000). Convert Sub Co's accounts to U.S. dollars showing the exchange rate and U.S. dollar amount for each account. . Prepare Sub Co's December 31, 2022 financial statements in U.S. dollars: Balance Sheet (in classified format), Income Statement (in multiple-step format) and Statement of Retained Earnings (ignore income tax expense). Prepare Sub Co's December 31, 2022 Statement of Cash Flows, assuming the following: - No plant assets were purchased or sold during 2022 - No bonds payable were issued (i.e., borrowed) or paid during 2022 - No common stock was issued during 2022 - No common stock was purchased from stockholders (i.e., treasury stock) - Any effects of foreign exchange rate changes are classified on the Statement of Cash Flows as "Effects of foreign exchange rate changes" (see the Discussion Case - FSA (Data) Excel file for an example of the format).Trial Exchange Trial Sub Co Trial Balance in British Pounds Balance Rate Balance Debits Cash E 136,505 $ Accounts receivable 42,514 Inventory 125,483 Plant assets 100,000 Advance to parent 58,333 Cost of sales 268,850 Depreciation expense 13,005 Wages and salaries expense 109,127 Other expenses 74,474 Dividends declared 30,000 E 958,291 Credits Accumulated depreciation, plant assets E 33,005 Accounts payable 32,953 Bonds payable 100,000 Common stock 200,000 Retained earnings 50,000 Sales 540,000 Exchange gain (on the advance to parent) 2,333 E 958,291