Information for Part 1

A statement of financial position and a statement of income are provided for Euro Subsidiary. The amounts shown are presented in Euros (). You learn the following about Euro Subsidiary:

The company's functional currency is the Euro.

The parent company's reporting currency is the US dollar.

Euro Subsidiary began business January 2015.

Exchange rates are as follows (assume these are correct, don't look them up!). The chart shows the number of US dollars one Euro is worth, January each year 2015-2020, and June and December 31 (assumed) for 2020. So, on January 1, 2015, 1 Euro is worth $1.20. Do not look for more information on exchange rates, use only the ones provided in the table.

Assume all of the common stock was issued/sold at the start of business in 2015. Assume all property, plant, and equipment, and the patents were purchased at the start of business 2015, too. You can reasonably assume that revenues and expenses occurred evenly throughout the year 2020.

You can also assume that retained earnings from earlier years was earned evenly over the years 2015-2019.

Jan-15 1.20

Jan-16 1.08

Jan-17 1.05

Jan-18 1.21

Jan-19 1.15

Jan-20 1.12

Jun-20 1.14

Dec-20 1.22

Required for Part 1

A. Determine appropriate exchange rates to translate/remeasure (which is it?) from Euros to dollars. You will need to make some assumptions in doing this and I expect there will be different answers.

B. Translate/remeasure (which is it?) Euro Subsidiary's statement of financial position and statement of income to U.S. dollars. I don't include a statement of comprehensive income, if you need to reflect something in that statement, just make a note of it. (There's another hint!)

C. The end result should be a US dollar statement of financial position and statement of income, just those two (no cash flow, no statement of stockholders' equity).

D. You must show me the rates you used, and if a calculation was involved, I must be able to review that calculation (calculating an average rate, for example, yet another hint). Using a formula in Excel is sufficient, as I can review the formula. I would prefer that you use formulas, by the way. And just to emphasize, this part is completely separate from Part 2. And to be honest, these instructions make the problem sound much more complex than it is! Exhibit 10.1 in the textbook is a great reference.