Quesr on 5 Partially correct Mark 91.30 out of 185.00 Flag question 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 a 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 3,150,000 1.48 $ 4.662.000 Cost of goods sold (1,890,000) ( (2.797,200) Gross profit 1,260,000 1,864,800 Operating expenses (819,000) 1.48 ( (1,212,120) 1.43 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 comp Round all answers to the nearest whole number. $ 0 x Direct computation of translation adjustment: BOY net assets x (EOY - BOY exchange ra - Net income x (EOY - Average exchange rate) Dividends x (EOY - Dividend exchange rat - 17,640 (882) 0 x (102,848) 0 x BOY cumulative translation adjustment EOY cumulative translation adjustment $ General Journal Description Equity Investment Cumulative Translation Adjustment To record the translation adjustment for the year Debit Credit 10 x 0 0 0 % C. Following are selected financial statement accounts for the parent: Income statement: Balance sheet: Sales $13,815,000 Assets (9,670,500) Cash Cost of goods sold $1,526,569 $24,387,845 Current year translation gain (loss) EOY cumulative translation adjustment 179,596 $76,748 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 54,139,188 on the parent's balance sheet. Ov 0 Equity Investment BOY Common stack 1,568,535 x BOY APIC 0 BOY Retained earnings 0 % BOY AAP BOY Cumulative translation adjustment (102,848) Equity income Current translation adjustment AAP Translation adjustment (ADCI) OX Balance Ox 0 0x Dividends Ov 0 d. Using your translated subsidiary financial statements from Part a and the parent's financial data provided in Partc prepare the consolidation spreadsheet for the year. Elimination Entries Dr Cr Parent Sub Consolidated $ OX 0X Income statement: Sales Cost of goods sold Gross profit Equity income Operating expenses OX 5 $13,815,00 (9,670.500) 4.144,500 652,680 (2.624,850) $2,172,330 $ OX 0 0 % OX Net income OX $ LC OX 0 x 1,090,00 2,172,330 (475,920) $13,594,410 $ 0X (0] 0 X 0X OX $ 0X OX OX $(102,848) $ 179,596 $76,748 $ 0X [C] 0 x edings Het income ividends OY retained earnings tatement of Accumulated Comprehensive Income: OY cumulative translation adjustment urrent-year translation gain (loss) OY cumulative translation adjustment alance sheet: ssets ash Lccounts receivable nventory quity investment 0X [E] $ 0X [D] $ 0X OX OX 0X $ OX $ 0 x $1,526,569 $ 1,768,320 2,680, 110 4,139,188 OX 0 X 0 0 x ] 0X [E] 0X [A] roperty, plant and equipment (PPE), net 14,273,658 OX OX 10 X [A] [D] 0X OX $24,387,845 $ $ OX otal assets abilities and stockholders' equity urrent liabilities ong-term liabilities ommon stock OX OX OX OX 0x OX LPIC 1,106,581 750,000 1,568,535 7,291,571 13,594,410 76,748 $24,387,845 $ 0X [E] 0X [E] OX 0 x 0 X OX etained earnings umulative translation adjustment otal liabilities and equity OX 0 x 0X $ OX$ OX $ Quesr on 5 Partially correct Mark 91.30 out of 185.00 Flag question 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 a 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 3,150,000 1.48 $ 4.662.000 Cost of goods sold (1,890,000) ( (2.797,200) Gross profit 1,260,000 1,864,800 Operating expenses (819,000) 1.48 ( (1,212,120) 1.43 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 comp Round all answers to the nearest whole number. $ 0 x Direct computation of translation adjustment: BOY net assets x (EOY - BOY exchange ra - Net income x (EOY - Average exchange rate) Dividends x (EOY - Dividend exchange rat - 17,640 (882) 0 x (102,848) 0 x BOY cumulative translation adjustment EOY cumulative translation adjustment $ General Journal Description Equity Investment Cumulative Translation Adjustment To record the translation adjustment for the year Debit Credit 10 x 0 0 0 % C. Following are selected financial statement accounts for the parent: Income statement: Balance sheet: Sales $13,815,000 Assets (9,670,500) Cash Cost of goods sold $1,526,569 $24,387,845 Current year translation gain (loss) EOY cumulative translation adjustment 179,596 $76,748 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 54,139,188 on the parent's balance sheet. Ov 0 Equity Investment BOY Common stack 1,568,535 x BOY APIC 0 BOY Retained earnings 0 % BOY AAP BOY Cumulative translation adjustment (102,848) Equity income Current translation adjustment AAP Translation adjustment (ADCI) OX Balance Ox 0 0x Dividends Ov 0 d. Using your translated subsidiary financial statements from Part a and the parent's financial data provided in Partc prepare the consolidation spreadsheet for the year. Elimination Entries Dr Cr Parent Sub Consolidated $ OX 0X Income statement: Sales Cost of goods sold Gross profit Equity income Operating expenses OX 5 $13,815,00 (9,670.500) 4.144,500 652,680 (2.624,850) $2,172,330 $ OX 0 0 % OX Net income OX $ LC OX 0 x 1,090,00 2,172,330 (475,920) $13,594,410 $ 0X (0] 0 X 0X OX $ 0X OX OX $(102,848) $ 179,596 $76,748 $ 0X [C] 0 x edings Het income ividends OY retained earnings tatement of Accumulated Comprehensive Income: OY cumulative translation adjustment urrent-year translation gain (loss) OY cumulative translation adjustment alance sheet: ssets ash Lccounts receivable nventory quity investment 0X [E] $ 0X [D] $ 0X OX OX 0X $ OX $ 0 x $1,526,569 $ 1,768,320 2,680, 110 4,139,188 OX 0 X 0 0 x ] 0X [E] 0X [A] roperty, plant and equipment (PPE), net 14,273,658 OX OX 10 X [A] [D] 0X OX $24,387,845 $ $ OX otal assets abilities and stockholders' equity urrent liabilities ong-term liabilities ommon stock OX OX OX OX 0x OX LPIC 1,106,581 750,000 1,568,535 7,291,571 13,594,410 76,748 $24,387,845 $ 0X [E] 0X [E] OX 0 x 0 X OX etained earnings umulative translation adjustment otal liabilities and equity OX 0 x 0X $ OX$ OX $