PROBLEM 2 Translation of financial statements Assume that your company owns a subsidiary operating in Brazil. The subsidiary maintains its books in the Brazilian real (BRL) as its functional currency. Following are the subsidiary's financial statements (in BRL) for the most recent year: (in BRL) in BRL) in BRL) Income statement: 3.750.000 2.250.000 Cost of goods sold..... Gross profit Operating expenses..... Net income Statement of cash flows: Net Income.... Change in accounts receivable... Change in inventories...... Change in current liabilities. Net cash from operating activities.... 525,000 (145,000) (186 250) 106,000 290,750 Balance sheet: Assets Cash... 1,067 250 Accounts receivable........ 870,000 Inventory. 1,117,500 Property, plant, and equipment PPE),net... .. 2.087.000 Total assets... 5,121,750 1,500,000 1975,000) 525.000 Change in PPE, net ............ Net cash from investing activities...... (192.000) (192,000) Statement of retained earnings BOY retained emings..... 1.968.750 Net income. 525.000 Dividends.. . BOY retained earnings..... 2.441.250 Liabilities and stockholders' equity Current liabilities...... 635.000 Long-term ibilities... 1,482,000 Common stock 250,000 APIC 312,500 Retained earnings. 2.441.250 Total abilities and equity.... Change in long-term debt .... Dividends .............. .. Net cash from financing activities .... 247.000 (52.500) 194,500 5,121.750 302,250 765,000 Net change in cash.. Beginning cash..... Ending cash.... 1,067 250 The relevant exchange rates for the SUS value of the Brazilian real (BRL) 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) ......... $0.22 $0.29 $0.25 $0.26 $0.26 $0.27 $0.10 a. Translate the subsidiary's income statement, statement of retained earnings, balance sheet, Statemenfeeshomes into SUS (assume that the BOY Retained Earnings is $1.537,810). Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of S(1.037,185). b