Please zoom in on any portions that appear too small to see
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. The relevant exchange rates for the $US value of the British pound (GBP) are as follows: BOY rate $1.45 EOY rate $1.52 Avg. rate $1.48 PPE purchase date rate $1.49 LTD borrowing date rate $1.49 Dividend rate $1.50 Historical rate (common stock and APIC) $0.55 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 $2,926,035). Round answers in the "In US Dollars" column to the nearest whole number. Translation In (in GBP) Rate US Dollars Income Statement: Sales 0$ 0 0 0 3,150,000 ( (1,890,000) 1,260,000 (819,000) 441,000 0 0 0 $ 0 Cost of goods sold Gross profit Operating expenses Net income Statement of retained earnings: BOY ret. earnings Net income Dividends EOY ret. earnings Balance sheet: 1.653.750 5 0 0 0 441,000 (44,100) 2,050,650 0 0 5 0 Assets Cash 896,490 0$ 0 0 0 0 0 0 0 0 0 $ $ 0 0 Accounts receivable 730,800 Inventory 938,700 Property, plant, and equipment (PPE). net 1,736,280 Total assets 4,302,270 Liabilities and stockholders' equity Current liabilities 534,240 Long-term liabilities 1,244,880 Common stock 210,000 APIC 262,500 Ret, earnings 2.050.650 0 $ 0 0 0 0 0 0 0 0 0 0 0 0 Total liabilities and equity 4.302.270 $ 441,000 0$ 0 0 0 0 0 0 (121,800) (156,450) 89,040 251,790 0 0 0 0 0 0 Statement of cash flows: Net income Change in accounts receivable Change in inventories Change in current liabilities Net cash from operating activities Change in PPE.net Net cash from investing activities Change in long-term debt Dividends Net cash from financing activities Net change in cash Effect of exchange rate on cash Beginning cash Ending cash (161.280) (161,280) 0 0 0 0 0 207,480 (44,100) 163,380 253.890 0 0 0 0 0 642,600 0 0 0 896,490 0 $ 0 b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $(102,848). 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 incomex (EOY - Average exchange rate) 0 0 0 0 EOY cumulative translation adjustment $ 0 General Journal Description Debit Credit 0 0 0 0 0 0 To record the translation adjustment for the year C. Following are selected financial statement accounts for the parent: Income statement: Balance sheet: Sales Cost of goods sold Gross profit Equity income $13,815,000 Assets (9.670.500) Cash $1,526,569 4,144.500 Accounts receivable 1,768,320 652,680 Inventory 2.680.110 (2.624,850) Equity investment 4,139,188 $2,172,330 Property, plant, and equipment (PPE), net 14,273,658 $24,387,845 Operating expenses Net income Statement of retained earnings: BOY retained earnings Net income Dividends Ending retained earnings $1,106,582 $11,898,000 Liabilities and stockholders' equity 2,172.330 Current liabilities (475.920) Long-term liabilities $13,594,410 Common stock APIC 750,000 1,568,535 NA 7.291.571 13,594,410 Statement of accum. comp. income: BOY cumulative translation adjustment Current-year translation gain (loss) EOY cumulative translation adjustment Retained earnings $(102,848) Cumulative translation adjustment 179,596 $76.748 76,748 $24.387.845 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 $4,139,188 on the parent's balance sheet. Equity Investment BOY Common stock 0 0 BOY APIC 0 0 0 BOY Retained earnings 0 0 BOY AAP 0 0 BOY Cumulative translation adjustment 0 0 Cquity income 0 0 Dividends Current translation adjustment 0 0 AAP Translation adjustment (AOCI) 0 0 0 Balance 0 0 0 0 0 d. Using your translated subsidiary financial statements from Part a and the parent's financial data provided in Part prepare the consolidation spreadsheet for the year. Elimination Entries Parent Sub Dr Consolidated Income statement: Sales $13.815,000 $ 0 $ 0 Cost of goods sold (9,670,500) 0 Gross profit 4,144.500 0 $ 0 Cquity income 652,680 TC CI a 0 Operating expenses (2,624 ASOS 0 0 Net income $2,172,330 $ 0 $ Statement of retained earnings: BOY retained earnings $11,890,000 $ D C a $ 0 Nel income 2.172.330 0 0 Dividends (475920) 0 QICI 0 COY retained earnings $13,594,410 S 0 $ Statement of Accumulated Comprehensive Income: BOY cumulative translation adjustment S[102.848) 0 0 $ 0 Current-year translation gain floss) 179,596 OC a G D 0 COY cumulative translation adjustment $76,748 0 $ Balance sheet: Assets Cash $1,526,569 $ 0 $ 0 Accounts receivable 1,768,320 0 $ 0 0 Inventory 2,680,110 0 0 Cquity investment 4,139,188 a C 0 OC a CA Property, plant and equipment (PPD) net 14273,65 0 FAI o 0 [D] a Total assets $24 387,845 $ 0 $ 0 Liabilities and stockholders' equity Current liabilities 1,106.581 0 0 Long term liabilities 750,000 0 0 0 Common stock 1568,585 D C a 0 APIC 7.291,571 DET 0 0 Retained earnings 13,594,410 0 0 0 Cumulative translation adjustment 76,748 0 0 Total liabilities and equity $24.387,845 0 $ 0 $ a $ 0 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. The relevant exchange rates for the $US value of the British pound (GBP) are as follows: BOY rate $1.45 EOY rate $1.52 Avg. rate $1.48 PPE purchase date rate $1.49 LTD borrowing date rate $1.49 Dividend rate $1.50 Historical rate (common stock and APIC) $0.55 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 $2,926,035). Round answers in the "In US Dollars" column to the nearest whole number. Translation In (in GBP) Rate US Dollars Income Statement: Sales 0$ 0 0 0 3,150,000 ( (1,890,000) 1,260,000 (819,000) 441,000 0 0 0 $ 0 Cost of goods sold Gross profit Operating expenses Net income Statement of retained earnings: BOY ret. earnings Net income Dividends EOY ret. earnings Balance sheet: 1.653.750 5 0 0 0 441,000 (44,100) 2,050,650 0 0 5 0 Assets Cash 896,490 0$ 0 0 0 0 0 0 0 0 0 $ $ 0 0 Accounts receivable 730,800 Inventory 938,700 Property, plant, and equipment (PPE). net 1,736,280 Total assets 4,302,270 Liabilities and stockholders' equity Current liabilities 534,240 Long-term liabilities 1,244,880 Common stock 210,000 APIC 262,500 Ret, earnings 2.050.650 0 $ 0 0 0 0 0 0 0 0 0 0 0 0 Total liabilities and equity 4.302.270 $ 441,000 0$ 0 0 0 0 0 0 (121,800) (156,450) 89,040 251,790 0 0 0 0 0 0 Statement of cash flows: Net income Change in accounts receivable Change in inventories Change in current liabilities Net cash from operating activities Change in PPE.net Net cash from investing activities Change in long-term debt Dividends Net cash from financing activities Net change in cash Effect of exchange rate on cash Beginning cash Ending cash (161.280) (161,280) 0 0 0 0 0 207,480 (44,100) 163,380 253.890 0 0 0 0 0 642,600 0 0 0 896,490 0 $ 0 b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $(102,848). 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 incomex (EOY - Average exchange rate) 0 0 0 0 EOY cumulative translation adjustment $ 0 General Journal Description Debit Credit 0 0 0 0 0 0 To record the translation adjustment for the year C. Following are selected financial statement accounts for the parent: Income statement: Balance sheet: Sales Cost of goods sold Gross profit Equity income $13,815,000 Assets (9.670.500) Cash $1,526,569 4,144.500 Accounts receivable 1,768,320 652,680 Inventory 2.680.110 (2.624,850) Equity investment 4,139,188 $2,172,330 Property, plant, and equipment (PPE), net 14,273,658 $24,387,845 Operating expenses Net income Statement of retained earnings: BOY retained earnings Net income Dividends Ending retained earnings $1,106,582 $11,898,000 Liabilities and stockholders' equity 2,172.330 Current liabilities (475.920) Long-term liabilities $13,594,410 Common stock APIC 750,000 1,568,535 NA 7.291.571 13,594,410 Statement of accum. comp. income: BOY cumulative translation adjustment Current-year translation gain (loss) EOY cumulative translation adjustment Retained earnings $(102,848) Cumulative translation adjustment 179,596 $76.748 76,748 $24.387.845 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 $4,139,188 on the parent's balance sheet. Equity Investment BOY Common stock 0 0 BOY APIC 0 0 0 BOY Retained earnings 0 0 BOY AAP 0 0 BOY Cumulative translation adjustment 0 0 Cquity income 0 0 Dividends Current translation adjustment 0 0 AAP Translation adjustment (AOCI) 0 0 0 Balance 0 0 0 0 0 d. Using your translated subsidiary financial statements from Part a and the parent's financial data provided in Part prepare the consolidation spreadsheet for the year. Elimination Entries Parent Sub Dr Consolidated Income statement: Sales $13.815,000 $ 0 $ 0 Cost of goods sold (9,670,500) 0 Gross profit 4,144.500 0 $ 0 Cquity income 652,680 TC CI a 0 Operating expenses (2,624 ASOS 0 0 Net income $2,172,330 $ 0 $ Statement of retained earnings: BOY retained earnings $11,890,000 $ D C a $ 0 Nel income 2.172.330 0 0 Dividends (475920) 0 QICI 0 COY retained earnings $13,594,410 S 0 $ Statement of Accumulated Comprehensive Income: BOY cumulative translation adjustment S[102.848) 0 0 $ 0 Current-year translation gain floss) 179,596 OC a G D 0 COY cumulative translation adjustment $76,748 0 $ Balance sheet: Assets Cash $1,526,569 $ 0 $ 0 Accounts receivable 1,768,320 0 $ 0 0 Inventory 2,680,110 0 0 Cquity investment 4,139,188 a C 0 OC a CA Property, plant and equipment (PPD) net 14273,65 0 FAI o 0 [D] a Total assets $24 387,845 $ 0 $ 0 Liabilities and stockholders' equity Current liabilities 1,106.581 0 0 Long term liabilities 750,000 0 0 0 Common stock 1568,585 D C a 0 APIC 7.291,571 DET 0 0 Retained earnings 13,594,410 0 0 0 Cumulative translation adjustment 76,748 0 0 Total liabilities and equity $24.387,845 0 $ 0 $ a $ 0
