On January 1,Year 1, Parker, Inc., a U.S.-based firm listed on the NY Stock Exchange, purchased 100 percent of Suffolk PLC, an entity operating in the oil industry, located in Great Britain. Parker paid 52,000,000 British pounds () for its purchases. The excess of cost over book values is attributable to land (part of property, plant, and equipment) and is not subject to depreciation. Parker accounts for its investment in Suffolk at cost. On January 1, Year 1, Suffolk reported the following balance sheet: Cash. 2,000,000 Accounts payable .. 1,000,000 Accounts receivable.. 3,000,000 Long-term debt 8,000,000 Inventory.. 14,000,000 Common Stock 44,000,000 PP&E (net) 40,000,000 Retained earnings 6,000,000 59,000,000 59,000,000 Suffolks Year 1 income was recorded at 2,000,000. No dividends were declared or paid by Suffolk in 2015. On December 31, Year 2, two years after the date of acquisition, Suffolk submitted the following trial balance to Parker for consolidation: Cash. 1,500,000 Accounts receivable.. 5,200,000 Inventory.. 18,000,000 Property, Plant, & Equipment (net) 36,000,000 Accounts Payable.. (1,450,000) Long-term debt.. (5,000,000) Common Stock.. (44,000,000) Retained Earnings (1/1/16). (8,000,000) Sales... (28,000,000) Cost of Goods Sold.. 16,000,000 Depreciation. 2,000,000 Other Expenses.. 6,000,000 Dividends Paid (1/30/16). 1,750,000 0 +++ Other than the payment of dividends, no intercompany transactions occurred between the two companies. Relevant exchange rates for the British pound were as follows: January 1 January 30 Average December 31 Year 1 $1.60 $1.61 $1.62 $1.64 Year 2 1.64 1.65 1.66 1.68 December 31, Year 2, financial statements (before consolidation with Suffolk) follow. Dividend income is the U.S. dollar amount of dividends received from Suffolk translated at the $1.65/ exchange rate at January 30, 2016. The amounts listed for dividend income and all affected accounts (i.e., net income, December 31, retained earnings, and cash) reflect the $1.65/ exchange rate at January 30, Year 2. Credit balances are in parentheses. Sales. $ (70,000,000) Cost of Goods Sold. 34,000,000 Depreciation. 20,000,000 Other Expenses... 6,000,000 Dividend income... (2,887,500) Net income.$ (12,887,500) Retained Earnings (1/1/Year 2) $ (48,000,000) Net income, Year 2 (12,887,500) Dividends, 1/30/Year 2 .. 4,500,000 Retained Earnings (12/31/ Year 2) ..$(56,387,500) Cash. $ 3,687,500 Accounts receivable. 10,000,000 Inventory 30,000,000 Investment in Suffolk. 83,200,000 Property, Plant, & Equipment (net) 105,000,000 Accounts Payable. (25,500,000) Long-term debt. (50,000,000) Common Stock.. (100,000,000) Retained Earnings (12/31/Year 2) $ (56,387,500) Parkers chief financial officer (CFO) wishes to determine the effect that a change in the value of the British pound would have on consolidated net income and consolidated stockholders equity. To help assess the foreign currency exposure associated with the investment in Suffolk, the CFO requests assistance in comparing consolidated results under actual exchange rate fluctuations with results that would have occurred had the dollar value of the pound remained constant or declined during the first two years of Parkers ownership. In addition to the risk Parker faces from its exposure to the British pound, Suffolks oil operations sometimes result in soil contamination. Suffolk cleans up any contamination when required to do so under the laws of the particular country in which it operates. In one of the countries in which Suffolk operates, there is no legislation requiring cleanup. In that same country, Suffolk had inadvertently contaminated land in prior years. As of October 31, Year 2, it is virtually certain that a law requiring the remediation of contaminated land will be enacted in this jurisdiction, though it is not expected to be issued until after the December 31 year-end. A consultant has been hired to help estimate the cost of clean-up. The CFO has requested assistance in assessing the risk and disclosure requirements Parker faces from its foreign exchange exposure and environmental exposure. Suffolk prepares its financial statements in accordance with (1) U.S. GAAP in reporting to its parent and (2) IFRS in reporting to its U.K. based lender. The CFO has requested that you prepare a memorandum with a supporting report that addresses the following requirements. Required: Part A. Given the relevant exchange rates presented, use an electronic spreadsheet to complete the following three parts: 1. Translate Suffolks December 31, Year 2, trial balance from British pounds to U.S. dollars. The British pound is Suffolks functional currency. 2. Prepare a schedule that details the change in Suffolks cumulative translation adjustment (beginning net assets, income, dividends, etc.) for Year 1 and Year 2.