Translation Local Currency Is the Functional Currency On January 2, 2019, P Company, a U.S.-based company, acquired for 2,000,000 francs an 80% interest in SFr Company, a Swiss company. On January 2, 2019, SFr Company reported a retained earnings balance of 480,000 francs. Ser's books are maintained in Swiss francs and are in conformity with U.S. generally accepted accounting principles. Trial balances of the two companies as of December 31, 2020, are presented here: Debits P Company (Dollars) SFr Company (Swiss Francs) Cash 500,200 962.500 Accounts Receivable 516.400 660,000 Inventories (FIFO Cost) 627,800 1.037 500 Tavestment in SFr Company 297.806 Land 450.000 500.000 Buildings (net) 610.000 350,000 Equipment (net) 290.000 405.000 Dividends Declared 200.000 375,000 Cost of Goods Sold 2.720,000 2.319.500 Depreciation Expense 219.000 125.000 Other Expense 914.000 818.950 Income Tax Expense 02-500 Totals 32416206 28.85350 Credits Accounts Payable 540,000 800.000 Short-Term Notes Payable 300.000 650.750 Bonds Payable 700.000 850,000 Common Stock 800.000 960.000 Additional Paid-in Capital 300.000 300,000 Retained Earnings. / $42.88 $13.000 Sales 4.000.000 3.775.000 Equity Income 53328 Totals 2:26.206 28.8.1 Other information related to the subsidiary follows: Other information related to the subsidiary follows: 1. Beginning inventory of 830,000 francs was acquired when the exchange rate was $1.078. 2. Purchases made uniformly throughout 2020 were 2,520,000 francs. 3. The franc is identified as the subsidiary's functional currency. 4. The subsidiary's beginning (1/1/20) retained earnings and cumulative translation adjustment (credit) in dollars were $75,948 and $36,462, respectively. 5. All plant assets were acquired before the parent obtained a controlling interest in the subsidiary. 6. Sales are made and all expenses are incurred uniformly throughout the year. 7. The ending inventory was acquired during the last quarter. 8. The subsidiary declared and paid dividends of 375,000 francs on September 2. 9. The following direct exchange rate quotations were available: I Date of subsidiary acquisition 31.07 Average for 2014 1.075 January 1, 2015 1.08 September 2, 2015 109 December 31, 2015 Average for the fourth quarter.2015 1.095 Average for 2015 1.085 1.10 Required: 1. Prepare a translated balance sheet and combined statement of income and retained earnings for the subsidiary. 2. Prepare a schedule to verify the translation adjustment. 3. Compute the following ratios based on the franc and the U.S. dollar financial statements: 1. Current ratio. 2. Debt to equity. 3. Gross profit percentage. 4. Net income to sales