Question
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
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$). As of December 31, 2015, the subsidiary is preparing financial statements in anticipation of consolidation with the U.S. parent corporation. Both ledgers for the subsidiary are as follows: |
Main OperationCanada | ||
Debit | Credit | |
Accounts payable | C$ 51,510 | |
Accumulated depreciation | 47,000 | |
Buildings and equipment | C$ 187,000 | |
Cash | 46,000 | |
Common stock | 70,000 | |
Cost of goods sold | 223,000 | |
Depreciation expense | 8,900 | |
Dividends, 4/1/15 | 39,000 | |
Gain on sale of equipment, 6/1/15 | 7,000 | |
Inventory | 99,000 | |
Notes payabledue in 2018 | 89,000 | |
Receivables | 88,000 | |
Retained earnings, 1/1/15 | 155,590 | |
Salary expense | 43,000 | |
Sales | 332,000 | |
Utility expense | 11,000 | |
Branch operation | 7,200 | |
Totals | C$ 752,100 | C$ 752,100 |
Branch OperationMexico | ||
Debit | Credit | |
Accounts payable | Ps 74,000 | |
Accumulated depreciation | 52,000 | |
Building and equipment | Ps 60,000 | |
Cash | 69,000 | |
Depreciation expense | 4,000 | |
Inventory (beginningincome statement) | 43,000 | |
Inventory (endingincome statement) | 38,000 | |
Inventory (endingbalance sheet) | 38,000 | |
Purchases | 77,000 | |
Receivables | 41,000 | |
Salary expense | 11,000 | |
Sales | 144,000 | |
Main office | 35,000 | |
Totals | Ps 343,000 | Ps 343,000 |
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 2005 when the currency exchange rate was C$0.25 = Ps 1. | |
Purchases should be assumed as having been made evenly throughout the fiscal year. | |
Beginning inventory was acquired evenly throughout 2014; ending inventory was acquired evenly throughout 2015. | |
The Main Office account on the Mexican records should be considered an equity account. This balance was remeasured into C$7,200 on December 31, 2015. | |
Currency exchange rates for 1 Ps applicable to the Mexican operation follow: |
Weighted average, 2014 | C$ | 0.20 |
January 1, 2015 | 0.22 | |
Weighted average rate for 2015 | 0.24 | |
December 31, 2015 | 0.25 | |
The December 31, 2014, consolidated balance sheet reported a cumulative translation adjustment with a $56,950 credit (positive) balance. | |
The subsidiarys common stock was issued in 2004 when the exchange rate was $0.49 = C$1. |
The subsidiarys December 31, 2014, Retained Earnings balance was C$155,590.00, a figure that has been translated into US$66,663. | |
The applicable currency exchange rates for 1 C$ for translation purposes are as follows: |
January 1, 2015 | US$ | 0.70 |
April 1, 2015 | 0.69 | |
June 1, 2015 | 0.68 | |
Weighted average rate for 2015 | 0.67 | |
December 31, 2015 | 0.65 | |
a. | Remeasure the Mexican operations figures into Canadian dollars. (Hint: Back into the beginning net monetary asset or liability position.) (Input all amounts as positive values.)
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