Gramado Company was created as a wholly owned subsidiary of Porto Alegre Corporation (a U.S.- based company) on January 1, Year 1. On that date, Porto Alegre invested $42,000 in Gramado's capital stock. Given the exchange rate on that date of $0.84 per cruzeiro, the initial investment of $42,000 was converted into 50,000 cruzeiros (Cz). Gramado's cruzeiro-denominated opening Balance Sheet are as follows: Balance Sheet as of January 1, 2021 Cz 50,000 300,000 350,000 300,000 50,000 350,000 Cash Plant and equipment Total Long-term debt Capital stocks Total Income Statement for the Year Ended December 31, 2021 Sales Cost of goods sold Gross profit Operating expenses Income before tax Income taxes Net income During 2021, dividends in the amount of Cz20,000 were paid to the parent on December 1. Inventory was acquired evenly throughout the year with ending inventory acquired on December 1, 2021. Cz 540,000 (310,000) 230,000 (108,000) 122,000 (40,000) 82,000 Statement of Retained Earnings for the Year Ended December 31, 2021 Retained earnings, 1/1/2021 Net income Dividends Retained earnings, 31/12/2021 Cz 82,000 (20,000) 62,000 2:22 Cash Description Balance Sheet as at December 31, 2021 Cz Receivables Inventory Plant and equipment (net) Total assets Long-term debt Common stock Retained earnings, 12/31/2021 Total liabilities and stockholders' equity 50,000 100,000 32,000 230,000 412,000 4G 300,000 50,000 62,000 412,000 $ 0.80 The cruzeiro is the primary currency that Gramado uses in its day-to-day operations. The cruzeiro has steadily fallen in value against the dollar since Porto Alegre made the investment in Gramado on January 1, 2021. Relevant U.S. dollar ($) exchange rates for the cruzeiro for 2021 are as follows: Average for 2020 January 1, 2021 Average for 2021 December 1, 2021 December 31, 201 0.84 0.72 0.71 0.70 X 2:22 Description X The cruzeiro is the primary currency that Gramado uses in its day-to-day operations. The cruzeiro has steadily fallen in value against the dollar since Porto Alegre made the investment in Gramado on January 1, 2021. Relevant U.S. dollar ($) exchange rates for the cruzeiro for 2021 are as follows: Average for 2020 January 1, 2021 Average for 2021 December 1, 2021 December 31, 2021 REQUIRED: $ 0.80 0.84 4G 0.72 0.71 0.70 a) Translate Gramado Company's 2021 financial statements into U.S. dollars. b) Compute the translation adjustment by considering the impact of exchange rate changes on subsidiary's net income. Gramado Company was created as a wholly owned subsidiary of Porto Alegre Corporation (a U.S.- based company) on January 1, Year 1. On that date, Porto Alegre invested $42,000 in Gramado's capital stock. Given the exchange rate on that date of $0.84 per cruzeiro, the initial investment of $42,000 was converted into 50,000 cruzeiros (Cz). Gramado's cruzeiro-denominated opening Balance Sheet are as follows: Balance Sheet as of January 1, 2021 Cz 50,000 300,000 350,000 300,000 50,000 350,000 Cash Plant and equipment Total Long-term debt Capital stocks Total Income Statement for the Year Ended December 31, 2021 Sales Cost of goods sold Gross profit Operating expenses Income before tax Income taxes Net income During 2021, dividends in the amount of Cz20,000 were paid to the parent on December 1. Inventory was acquired evenly throughout the year with ending inventory acquired on December 1, 2021. Cz 540,000 (310,000) 230,000 (108,000) 122,000 (40,000) 82,000 Statement of Retained Earnings for the Year Ended December 31, 2021 Retained earnings, 1/1/2021 Net income Dividends Retained earnings, 31/12/2021 Cz 82,000 (20,000) 62,000 2:22 Cash Description Balance Sheet as at December 31, 2021 Cz Receivables Inventory Plant and equipment (net) Total assets Long-term debt Common stock Retained earnings, 12/31/2021 Total liabilities and stockholders' equity 50,000 100,000 32,000 230,000 412,000 4G 300,000 50,000 62,000 412,000 $ 0.80 The cruzeiro is the primary currency that Gramado uses in its day-to-day operations. The cruzeiro has steadily fallen in value against the dollar since Porto Alegre made the investment in Gramado on January 1, 2021. Relevant U.S. dollar ($) exchange rates for the cruzeiro for 2021 are as follows: Average for 2020 January 1, 2021 Average for 2021 December 1, 2021 December 31, 201 0.84 0.72 0.71 0.70 X 2:22 Description X The cruzeiro is the primary currency that Gramado uses in its day-to-day operations. The cruzeiro has steadily fallen in value against the dollar since Porto Alegre made the investment in Gramado on January 1, 2021. Relevant U.S. dollar ($) exchange rates for the cruzeiro for 2021 are as follows: Average for 2020 January 1, 2021 Average for 2021 December 1, 2021 December 31, 2021 REQUIRED: $ 0.80 0.84 4G 0.72 0.71 0.70 a) Translate Gramado Company's 2021 financial statements into U.S. dollars. b) Compute the translation adjustment by considering the impact of exchange rate changes on subsidiary's net income.