Translation of financial statements (2 years) Assume that your company owns a subsidiary operating in Germany. The subsidiary conducts most of its business activities in the European Economic Union and maintains its books in the Euro as its functional currency. Following are the subsidiary's financial statements (in ) for the prior and most recent years: Prior Year Current Year Income statement: Sales. Cost of goods sold Gross profit. Operating expenses Net income.. Statement of retained earnings: BOY retalned eamings.. Net income.. Dividends ... Ending retained earnings 3 250,000 (1.950.000) 1,300,000 (845.000) 155.000 3.900.000 (2.340.000) 1,560,000 (1.014,000) @ 548.000 IKE 1,638,000 455,000 (45,500) e2.047.500 2,047.500 646.000 (54,600) 2.538.900 Balance sheet: Assets Cash. Accounts receivable Inventory PPE, net Total assets. 413,920 754.000 968,500 2,331,680 64.468,100 1,109,940 904,800 1,162,200 2,149.680 5.826,620 Liabilities and stockholders' equity Current liabilities. Long-term liabilities Common stock APIC.. Retained earnings Total liabilities and equity @ 551,200 1.284.400 260.000 325.000 2.047,500 64.468.100 661.440 1,541 280 260,000 325,000 2,538.900 5,326.620 Current Year Statement of cash flows: Net Income Change in accounts receivable Change in Inventories.. Change in current liabilities Net cash flows from operating activities. e 548.000 (150.800) (193,700) 110 240 311,740 182,000 Change in PPE, net Net cash flows from investing activities 182,000 MIR Change in long-term debt.. Dividends... Net cash flows from financing activities COM 268, 880 (54.600) 202,280 090 000 Net change in cash. Effect of exchange rate on cash Beginning cash Ending cash INICI 413,920 & 109 940 NH The relevant exchange rates for the SUS value of the Euro () are as follows: Prior Year Current Year $1.29 $1.21 $1.25 WWW BOY rate......... EOY rate. Avg. rate........................ PPE purchase date rate............................ LTD borrowing date rate......................... Dividend rate Historical rate (common stock and APIC).......... $1.21 $1.15 $1.18 $1.17 $1.17 $1.16 $1.41 $1.22 $1.41 . Translate the subsidiary's income statement, statement of retained earnings, and balance sheet into SUS for both years (assume that the BOY Retained Earnings for the prior year is $780.000). and the statement of cash flows for the second year. 1.4 Compute the ending Cumulative Translation Adjustment directly for the current year. ho