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 using the temporal method 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: BOY rate EOY rate Avg. rate Dividend rate Historical rates: $0.95 $1.05 $0.98 $1.04 Beginning inventory $0.95 Land $0.70 Building $0.72 Equipment Historical rate (common stock and APIC) $0.50 $0.73 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 using the temporal method for the current year (assume that the BOY Retained Earnings is $7,667,700). Round all answers in the "In US Dollars" column to the nearest dollar. Remeasurement Rate 0.95$ 0.98 1.05 $ in CAD) $4,470,000 11,694,000 (5,364,000) $10,800,000 $3,921,600 7,200,000 (3,600,000) 4,800,000 (2,400,000) $9,921,600 $360,000 480,000 $840,000 0.7 $ 0.72 0.72 In US Dollars 4,246,500 11,460,120 (5,632,200) 10,074,420 2.745,120 5,184,000 (2,592,000) 3,504,000 (1,752,000) 7,089,120 259,200 350,400 609,600 0.73 Beginning inventory Purchases Ending inventory Cost of goods sold Land Building Accum.deprec.-building Equipment Accum.deprec.-equipment Property, plant, and equipment (PPE), net Depreciation expense-building Depreciation expense-equipment Depreciation expense Income statement: Sales Cost of goods sold Gross profit Operating expenses Depreciation Remeasurement loss Net income Statement of retained earnings: 0.73 $ 0.72$ 0.73 $ 0.98$ $18,000,000 (10,800,000) 7,200,000 (3,840,000) (840,000) 0.98 17,640,000 (10,074,420) 7,565,580 (3,763,200) (609,600) 2,469,600 x $2,520,000 $ 03,200) 13,840,000) (840,000) (609,600) OX 2,469,600 x $2,520,000 $ $ $9,450,000 2,520,000 (252,000) $11,718,000 7,667,700 3,192,780 x 17,640,000 x 17,640,000 x 1.04 $ Operating expenses Depreciation Remeasurement loss Net income Statement of retained earnings: BOY retained earnings Net income Dividends Ending retained earnings Balance sheet: Assets Cash Accounts receivable Inventory Property, plant, and equipment (PPE), net Total assets Liabilities and stockholders' equity Current liabilities Long-term liabilities Common stock APIC Retained earnings Total liabilities and equity 1.05$ 1.05 $5,122,800 4,176,000 5,364,000 9,921,600 $24,584.400 5,378,940 4,384,800 5,632,200 7,089,120 22,485,060 $3,052,800 7,113,600 1,200,000 1.05$ 1.05 0.5 3,205,440 7,469,280 600,000 750,000 10,460,340 22,485,060 0.5 1,500,000 11,718,000 $24,584,400 b. A Compute the remeasurement gain or loss directly assuming BOY net monetary assets of (3,081,600), a net monetary liability. Bound all answers to the nearest dollar 9,921,600 $24,584,400 7,089,120 22,485,060 $ Property, plant, and equipment (PPE), net Total assets Liabilities and stockholders' equity Current liabilities Long-term liabilities Common stock APIC Retained earnings Total liabilities and equity 1.05$ 1.05 3,205,440 7,469,280 600,000 $3,052,800 7,113,600 1,200,000 1,500,000 11,718,000 $24,584,400 0.5 0.5 750,000 10,460,340 22,485,060 b. A Compute the remeasurement gain or loss directly assuming BOY net monetary assets of (3,081,600), a net monetary liability. Round all answers to the nearest dollar. $ Change in net monetary assets: BOY net monetary assets x (EOY - BOY exchange rates Chg net monetary assets x (EOY - Avg exchange rate) Dividends x (EOY - Dividend exchange rate) Remeasurement loss 2,466,000 x 252,000 X 0X Check