Remeasurement of financial statements Assume that your company owns a subsidiary operating in Canada. The subsidiary has adopted the Canadian Dollar (CAD) as its functional currency. Your parent company operates this subsidiary like a division or a branch office, making all of its operating decisions, including pricing of its products. You conclude, therefore, that the functional currency of this subsidiary is the $US and that its financial statements must be remeasured prior to consolidation. The subsidiary's financial statements (in CAD) for the most recent year follow in part a. below: The relevant exchange rates for the $US value of the Canadian Dollar (CAD) are as follows: BUY rate ECY rate Avrate $0.75 $0.79 $0.76 $0.78 Dicend rate Historical ra Beginning Invertory $0.73 Land $0.77 Balding $0.77 Equipment $0.77 Historical rate (common stock and APIC! $0.63 For parts a. and b. below, use a negative sign with answers to indicate a reduction. a. Remeasure the subsidiary's income statement, statement of retained earnings, and balance sheet into SUS for the current year (assume that the BOY Retained Earnings is $2,216,365). Round all answers in the "In US Dollars" column to the nearest dollar. Remeasure In (in CAD) Beginning Iwerrary 1,303,750 -ment Rate US Dollars 0.735951,733 Purchases 3410,750 0.76 2.502,170 Encing wertary (1,564,500) 0.79 (1,238,055) Cast of goods sold 3.150,000 $ 2,307,953 1,143,800 0.775 880,725 Baiding Accum depree bulcing Equipment 2,100,000 0.77 1,617,000 (1,050,000) 0.77 (808,553) 1,400,000 0.77 1,078,000 Actum depree equipment (7CC,500) 0.77 (335,000) Property, plant, and equipment (PPEL.net 2,863,800 Depreciation expense-buiding Depreciation experse-equipment 105,000 140,000 0.77 $ 077 $ 2,228,225 80,850 107,800 245,000 $ 188,650 Depreciation experse Income statement: Sales 5,250,000 0.765399,000 Cost of goods sold (3,150,000) 0% Grass pre 2,100,000 Operating expenses (1,120,000) 0.76 (851,200) Depreciation (245,000) Equipment Accum deprec-equipment (700,333) 0.77 (539,000) Property, plant, and equipment (PPEL.net 2,892,800 $2.228,226 Depreciation expense bulding Depreciation expersa-equipment Depreciation expense 105,000 0.775 80,950 146,055 0.77 107,200 245,055 $ 188,650 Income statement! Sales Cost of goods seld Gruss profit 5.250,000 0.76 $3.990,000 Operating expenses Depreciation Remasurement lass Net income Statement of retained earnings: BOY reteinee earnings 2.756,250 Net income 735,000 Dividends (72.533) Encing reca ned earnings 3417,750 Balance sheet: (3.150.000) 2.100,000 (1,120,0001 0x Ux 0.76 (851,2001 (245,399) Ux = 735,000 5 $2.216,365 0x 1494,150 Accounts receivable 1.218,000 070 $1,180,379 0.7~ 967,220 Inventory 1564,500 0x Property, plant, and equipment (PPF).net 2893,800 Total assets 7.170,450 $ 0x Liabilities and stockholders equity Current lablites 890,400 0.75 5 706,416 Lang-term llaalities 2.074,800 0.79 1,539,092 Common stock APC 350,000 437,500 063 0.63 270,500 275,625 Retard earnings Total liabiit es and equity 3417,750 x 7.170,450 $ x b. Compute the remeasurement gain or loss directly assuming BOY net monetary assets of CAD (898,800), a net monetary liability. Round all answers to the nearest dollar. Change in net monetary assets: BOY net monetary assets x (LOY-BUY exchange rates. + Chg ret monetary assets x (ECY Avg exchange rate) DMdendsx (EDY - Dividend change rate) Remeasurement loss 5 153,920) v (755) = Check