Remeasurement of financial statements

Assume that your company owns a subsidiary operating in Australia. The subsidiary has adopted the Australian Dollar (AUD) 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 AUD) for the most recent year follow in part a. below:

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

BOY rate	$0.83
EOY rate	$0.70
Avg. rate	$0.76
Dividend rate	$0.71
Historical rates:
Beginning inventory	$0.83
Land	$0.72
Building	$0.72
Equipment	$0.72
Historical rate (common stock and APIC)	$1.02

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 $US for the current year (assume that the BOY Retained Earnings is $1,126,899).

Round all answers in "In US Dollars" column to the nearest dollar.

	(in AUD)	Remeasure Rate	In US Dollars
Beginning inventory	$819,500	Answer	Answer
Purchases	2,143,900	Answer	Answer
Ending inventory	(983,400)	Answer	Answer
Cost of goods sold	$1,980,000		Answer
Land	$718,960	Answer	Answer
Building	1,320,000	Answer	Answer
Accum.deprec.building	(660,000)	Answer	Answer
Equipment	880,000	Answer	Answer
Accum.deprec.equipment	(440,000)	Answer	Answer
Property, plant, and equipment (PPE), net	$1,818,960		Answer
Depreciation expensebuilding	$66,000	Answer	Answer
Depreciation expenseequipment	88,000	Answer	Answer
Depreciation expense	$154,000		Answer
Income statement:
Sales	$3,300,000	Answer	Answer
Cost of goods sold	(1,980,000)		Answer
Gross profit	1,320,000		Answer
Operating expenses	(704,000)	Answer	Answer
Depreciation	(154,000)		Answer
AnswerRemeasurement gainRemeasurement loss			Answer
Net income	$462,000		Answer
Statement of retained earnings:
BOY retained earnings	$1,732,500		Answer
Net income	462,000		Answer
Dividends	(46,200)	Answer	Answer
Ending retained earnings	$2,148,300		Answer
Balance sheet:
Assets
Cash	$939,180	Answer	Answer
Accounts receivable	765,600	Answer	Answer
Inventory	983,400		Answer
Property, plant, and equipment (PPE), net	1,818,960		Answer
Total assets	$4,507,140		Answer
Liabilities and stockholders' equity
Current liabilities	$559,680	Answer	Answer
Long-term liabilities	1,304,160	Answer	Answer
Common stock	220,000	Answer	Answer
APIC	275,000	Answer	Answer
Retained earnings	2,148,300		Answer
Total liabilities and equity	$4,507,140		Answer

b. Compute the remeasurement gain or loss directly assuming BOY net monetary assets of AUD (564,960), a net monetary liability.

Round all answers to the nearest dollar.

Change in net monetary assets:
AnswerBOY net monetary assets x (EOY - BOY exchange rates)BOY net monetary assets x BOY exchange rateSales x average exchange ratePurchases x average exchange rateOperating expenses x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net monetary assets x EOY exchange rateChg net monetary assets x (EOY - Avg exchange rate)Remeasurement lossEnding net monetary assets	Answer
Chg net monetary assets x (EOY - Avg exchange rate)	Answer
AnswerBOY net monetary assets x (EOY - BOY exchange rates)BOY net monetary assets x BOY exchange rateSales x average exchange ratePurchases x average exchange rateOperating expenses x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net monetary assets x EOY exchange rateChg net monetary assets x (EOY - Avg exchange rate)Remeasurement lossEnding net monetary assets	Answer
AnswerBOY net monetary assets x (EOY - BOY exchange rates)BOY net monetary assets x BOY exchange rateSales x average exchange ratePurchases x average exchange rateOperating expenses x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net monetary assets x EOY exchange rateChg net monetary assets x (EOY - Avg exchange rate)Remeasurement gainRemeasurement lossEnding net monetary assets	Answer