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) fin BRL) in BRL) Income statement Cost of goods sold........ 3.750.000 2.250.000 1.500.000 Balance sheet: Assets Cash.. Accounts receivable........ Inventory.. ...... Property, plant, and equipment (PPEL.net..... 1 067 250 870,000 1,117,500 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) 105,000 200.750 Gross profil Operating expenses... Net income 2.057.000 5,121,750 Total assets... Change in PPE, net.............. Net cash from investing activities...... (192,000) (192,000 Statement of retained earnings: BOY tained wings..... 1.968.750 Net income.. ... 525,000 Dividends.............. 152,509 BOY retained earnings..... 2.441.250 Libilities and stockholders' equity Current liabilities........... 636,000 Long-term abilities........ 1,482,000 Common stock............ 250,000 APIC ............... 312,500 Retained earnings ......... 2,441,250 Total abilities and equity.... 5,121,750 Change in long-term debt ... Dividends........ Net cash from financing activities .... 247,000 (52.500 194,500 Not change in cash. Beginning cash...... Ending cash.. 302.250 765.000 1,057,250 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 re... Dividend rate..... Historical rate (common stock and APIC) $0.22 $0.29 $0 25 $0.26 $0.26 50.27 $0.10 a. Translate the subsidiary's income statement statement of retained earnings, balance sheet, Statemenfellows into SUS (assume that the BOY Retained Eamings is $1,337,810), b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of S(1,037,185)