Q2. Assume that our company owns a subsidiary operating in France. The purchase price for the subsidiary included an AAP asset relating to Land that the parent estimated was worth 200,000 more than book value on the subsidiarys balance sheet. The exchange rate in effect when the subsidiary was acquired was $1.15:1. The subsidiary maintains its books in Euros () as the functional currency. Find the parents and the subsidiarys financial statements for the current year in the spreadsheet provided on the next page.

The relevant exchange rates for the $US value of the Euro () are as follows:

BOY Rate	$1.40
EOY rate	$1.50
Avg. rate	$1.45
PPE purchase date rate	$1.42
LTD borrowing date rate	$1.46
Dividend rate	$1.48
Historical rate (Common Stock and APIC)	$0.65

Assume the following: 1) the BOY Retained Earnings for the subsidiary is $515,810 and 2) the BOY Cumulative Translation Adjustment is $246,940.

Requirement:

Complete the consolidation spreadsheet for the year.

Subsidiary Parent (in $) Subsidiary (in ) Rate Dr. Cr. Consolidated (in $) Income statement: Sales 900,000 (540,000) 360,000 Cost of goods sold Gross Profit Equity income Operating expenses Net income Statement of retained earnings: BOY retained earnings Net income 5,000,000 (3,500,000) 1,500,000 182,700 (950,000) 732,700 (234,000) 126,000 472,500 126,000 3,206,750 732,700 (128,270) 3,811,180 Dividends (12,600) 585,900 Ending retained earnings Balance sheet: Assets Cash 256,140 208,800 268,200 Accounts receivable Inventory Equity Investment PPE, net Total Assets 205,695 640,000 900,000 1,381,350 5,166,000 8,293,045 496,080 1,229,220 Liabilities and Stockholders' Equity Current liabilities Long-term Liabilities Common Stock APIC Retained Earnings Cumulative Translation Adjustment Total Liabilities & Equity 797,956 2,500,000 150,509 699,662 3,811,180 333,738 8,293,045 152,640 355,680 60,000 75,000 585,900 1,229,220