ONLY NEED HELP WITH PARTS B & C
Translation of financial statements and consolidation of a foreign subsidiary (no amortization of AAP) Assume that your company owns a subsidiary operating in Great Britain. The subsidiary maintains its books in the British pound (GBP) as its functional currency. Following are the subsidiary's financial statements (in GBP) for the most recent year: (in GBP) (in GBP) (in GBP) Statement of Cash Flows: Net Income Change in Income Statement: Balance Sheet: Sales 2,730,000 Assets 382,200 Cost of Goods Sold (1,638,000) Cash 776,958 accounts (105,560) receivable Change in Gross profit 1,092,000 Accounts receivable 633,360 (135,590) inventories Change in current 77,168 Operating expenses (709,800) Inventory 813,540 liabilities Net cash from operating activities 82,00 Property, plant, and Net income 218,218 equipment (PPE), net 1,504,776 3,728,634 Total assets Statement of retained earnings: Change in PPE, net (139,776) Liabilities and Net cash from investing activities BOY ret. earnings 1,433,250 (139,776) stockholders' equity Net income 463,008 382,200 Curr. liabilities (38,220) L-T liabilities 777,230 Common stoc in long- Dividends 1,078,896 Chang 179,816 term debt EOY ret. earnings 182,000 Dividends (38,220) APIC 27,500 Net cas 141,596 financing activities 1,777,230 Ret. earnings Total liabilities and equity Net change in cash Beginning cash Ending cash 220,038 556,920 776,958 The relevant exchange rates for the $US value of the British pound (GBP) are as follows: BOY rate EOY rate Avg. rate PPE purchase date rate LTD borrowing date rate Dividend rate Historical rate (common stock and APIC) $1.50 $1.57 $1.53 $1.54 $1.54 $1.55 $0.60 HINT: For all parts of this problem, use a negative sign with your answers to indicate a reduction a. Translate the subsidiary's income statement, statement of retained earnings, balance sheet, and statement of cash flows from British pounds (GBP) into $US (assume that the BOY Retained Earnings for the subsidiary is $2,535,897). Round answers in the "In US Dollars" column to the nearest whole number. (in GBP) Rate US Dollars Income Statement: Sales 2,730,000 1.53 4,176,900 Cost of goods sold (1,638,000) 1.53 (2,506,140 Gross profit 1,092,000 1,670,760 Operating expenses (709,800) 1.53 (1,085,994 382,200 584,766 Net income Statement of retained earnings: BOY ret. earnings 1,433,250 $2,535,897 Net income 382,200 584,766 Dividends (38,220) 1.55 (59,210) EOY ret. earnings 1,777,230 $3,061,453 Balance sheet: Assets Cash 776,958 1.57 $1,219,824 Accounts receivable 633,360 1.57 994,375 Inventory 813,540 1.57 1,277,258 Property, plant, and equipment (PPE), net 1,504,776 1.57 2,362,498 3,728,634 $5,853,955 Total assets Liabilities and stockholders' equity Current liabilities 463,008 1.57 $726,923 Long-term liabilitie:s 1,078,896 1.57 1,693,867 Common stock 182,000 0.6 109,200 APIC 227,500 0.6 136,500 Ret. earnings 1,777,230 3,061,453 Net cash from investing activities (139,776) (215,255) Change in long-term debt 79,816 1.54 276,917 Dividends (38,220) 1.55 (59,241) Net cash from financing activities 41,596 217,676 Net change in cash 220,038 36,294 Effect of exchange rate on cash 48,150 Beginning cash 556,920 1.5 835,380 Ending cash 776,958 157 1,219,824 b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $(17,474). What journal entry did the parent company make as a result of this computation? Round all answers to the nearest whole number. Direct computation of translation adjustment: 0 Net income x (EOY - Average exchange rate 17,474) EOY cumulative translation adjustment General Journal Description Debit Credit To record the translation adjustment for the year Current-year translation gain (loss) 157,517 $21,228,770 EOY cumulative translation $140,043 adjustment c continued. Assume the following information: The purchase price for the subsidiary included an AAP asset relating to Land that the parent estimated was worth GBP200,000 more than its book value on the subsidiary's balance sheet. Confirm the balance of the Equity Investment account of $3,747,165 on the parent's balance sheet. Equity Investment BOY Common stock BOY APIO BOY Retained earnings BOY AAP 0 BOY Cumulative translation adjustment Equity ncome 0 Dividends Equity income Current translation adjustment AAP Translation adjustment 0 Dividends 0 (AOCI) Balance Translation of financial statements and consolidation of a foreign subsidiary (no amortization of AAP) Assume that your company owns a subsidiary operating in Great Britain. The subsidiary maintains its books in the British pound (GBP) as its functional currency. Following are the subsidiary's financial statements (in GBP) for the most recent year: (in GBP) (in GBP) (in GBP) Statement of Cash Flows: Net Income Change in Income Statement: Balance Sheet: Sales 2,730,000 Assets 382,200 Cost of Goods Sold (1,638,000) Cash 776,958 accounts (105,560) receivable Change in Gross profit 1,092,000 Accounts receivable 633,360 (135,590) inventories Change in current 77,168 Operating expenses (709,800) Inventory 813,540 liabilities Net cash from operating activities 82,00 Property, plant, and Net income 218,218 equipment (PPE), net 1,504,776 3,728,634 Total assets Statement of retained earnings: Change in PPE, net (139,776) Liabilities and Net cash from investing activities BOY ret. earnings 1,433,250 (139,776) stockholders' equity Net income 463,008 382,200 Curr. liabilities (38,220) L-T liabilities 777,230 Common stoc in long- Dividends 1,078,896 Chang 179,816 term debt EOY ret. earnings 182,000 Dividends (38,220) APIC 27,500 Net cas 141,596 financing activities 1,777,230 Ret. earnings Total liabilities and equity Net change in cash Beginning cash Ending cash 220,038 556,920 776,958 The relevant exchange rates for the $US value of the British pound (GBP) are as follows: BOY rate EOY rate Avg. rate PPE purchase date rate LTD borrowing date rate Dividend rate Historical rate (common stock and APIC) $1.50 $1.57 $1.53 $1.54 $1.54 $1.55 $0.60 HINT: For all parts of this problem, use a negative sign with your answers to indicate a reduction a. Translate the subsidiary's income statement, statement of retained earnings, balance sheet, and statement of cash flows from British pounds (GBP) into $US (assume that the BOY Retained Earnings for the subsidiary is $2,535,897). Round answers in the "In US Dollars" column to the nearest whole number. (in GBP) Rate US Dollars Income Statement: Sales 2,730,000 1.53 4,176,900 Cost of goods sold (1,638,000) 1.53 (2,506,140 Gross profit 1,092,000 1,670,760 Operating expenses (709,800) 1.53 (1,085,994 382,200 584,766 Net income Statement of retained earnings: BOY ret. earnings 1,433,250 $2,535,897 Net income 382,200 584,766 Dividends (38,220) 1.55 (59,210) EOY ret. earnings 1,777,230 $3,061,453 Balance sheet: Assets Cash 776,958 1.57 $1,219,824 Accounts receivable 633,360 1.57 994,375 Inventory 813,540 1.57 1,277,258 Property, plant, and equipment (PPE), net 1,504,776 1.57 2,362,498 3,728,634 $5,853,955 Total assets Liabilities and stockholders' equity Current liabilities 463,008 1.57 $726,923 Long-term liabilitie:s 1,078,896 1.57 1,693,867 Common stock 182,000 0.6 109,200 APIC 227,500 0.6 136,500 Ret. earnings 1,777,230 3,061,453 Net cash from investing activities (139,776) (215,255) Change in long-term debt 79,816 1.54 276,917 Dividends (38,220) 1.55 (59,241) Net cash from financing activities 41,596 217,676 Net change in cash 220,038 36,294 Effect of exchange rate on cash 48,150 Beginning cash 556,920 1.5 835,380 Ending cash 776,958 157 1,219,824 b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $(17,474). What journal entry did the parent company make as a result of this computation? Round all answers to the nearest whole number. Direct computation of translation adjustment: 0 Net income x (EOY - Average exchange rate 17,474) EOY cumulative translation adjustment General Journal Description Debit Credit To record the translation adjustment for the year Current-year translation gain (loss) 157,517 $21,228,770 EOY cumulative translation $140,043 adjustment c continued. Assume the following information: The purchase price for the subsidiary included an AAP asset relating to Land that the parent estimated was worth GBP200,000 more than its book value on the subsidiary's balance sheet. Confirm the balance of the Equity Investment account of $3,747,165 on the parent's balance sheet. Equity Investment BOY Common stock BOY APIO BOY Retained earnings BOY AAP 0 BOY Cumulative translation adjustment Equity ncome 0 Dividends Equity income Current translation adjustment AAP Translation adjustment 0 Dividends 0 (AOCI) Balance
