Sendelbach Corporation is a U.S.-based organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto. Although this wholly owned company operates primarily in Canada, it engages in some transactions through a branch in Mexico. Therefore, the subsidiary maintains a ledger denominated in Mexican pesos (Ps) and a general ledger in Canadian dollars (C$). As of December 31, 2020, the subsidiary is preparing financial statements in anticipation of consolidation with the U.S. parent corporation. Both ledgers for the subsidiary are as follows: Main OperationCanada | | Debit | | Credit | Accounts payable | | | | C$ | 21,695 | Accumulated depreciation | | | | | 33,000 | Buildings and equipment | C$ | 173,000 | | | | Cash | | 32,000 | | | | Common stock | | | | | 56,000 | Cost of goods sold | | 209,000 | | | | Depreciation expense | | 7,500 | | | | Dividends, 4/1/20 | | 25,000 | | | | Gain on sale of equipment, 6/1/20 | | | | | 5,600 | Inventory | | 85,000 | | | | Notes payabledue in 2023 | | | | | 75,000 | Receivables | | 74,000 | | | | Retained earnings, 1/1/20 | | | | | 141,590 | Salary expense | | 29,000 | | | | Sales | | | | | 318,000 | Utility expense | | 9,600 | | | | Branch operation | | 6,785 | | | | Totals | C$ | 650,885 | | C$ | 650,885 | | Branch OperationMexico | | Debit | | Credit | Accounts payable | | | | Ps | 53,100 | Accumulated depreciation | | | | | 20,100 | Building and equipment | Ps | 46,000 | | | | Cash | | 62,000 | | | | Depreciation expense | | 2,600 | | | | Inventory (beginningincome statement) | | 29,000 | | | | Inventory (endingincome statement) | | | | | 31,000 | Inventory (endingbalance sheet) | | 31,000 | | | | Purchases | | 63,000 | | | | Receivables | | 27,000 | | | | Salary expense | | 9,600 | | | | Sales | | | | | 130,000 | Main office | | | | | 36,000 | Totals | Ps | 270,200 | | Ps | 270,200 | | Additional Information -
The Canadian subsidiarys functional currency is the Canadian dollar, and Sendelbachs reporting currency is the U.S. dollar. The Canadian and Mexican operations are not viewed as separate accounting entities. -
The building and equipment used in the Mexican operation were acquired in 2010 when the currency exchange rate was C$0.19 = Ps 1. -
Purchases of inventory were made evenly throughout the fiscal year. -
Beginning inventory was acquired evenly throughout 2019; ending inventory was acquired evenly throughout 2020. -
The Main Office account on the Mexican records should be considered an equity account. This balance was remeasured into C$6,785 on December 31, 2020. -
Currency exchange rates for 1 Ps applicable to the Mexican operation follow: | | | Weighted average, 2019 | C$ | 0.24 | January 1, 2020 | | 0.26 | Weighted average rate for 2020 | | 0.28 | December 31, 2020 | | 0.29 | | -
The December 31, 2019, consolidated balance sheet reported a cumulative translation adjustment with a $42,950 credit (positive) balance. -
The subsidiarys common stock was issued in 2007 when the exchange rate was $0.51 = C$1. -
The subsidiarys December 31, 2019, retained earnings balance was C$141,590, an amount that has been translated into U.S.$66,803. -
The applicable currency exchange rates for 1 C$ for translation purposes are as follows: | | | January 1, 2020 | US$ | 0.70 | April 1, 2020 | | 0.69 | June 1, 2020 | | 0.68 | Weighted average rate for 2020 | | 0.67 | December 31, 2020 | | 0.65 | | -
Remeasure the Mexican operations account balances into Canadian dollars. (Note: Back into the beginning net monetary asset or liability position.) -
Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency, Canadian dollars. -
Translate the Canadian dollar functional currency financial statements into U.S. dollars so that Sendelbach can prepare consolidated financial statements. |