Translation of financial statements and consolidation of a foreign subsidiary (no amortization of AAP) Assume that your company owns a subsidiary operating in Great Britain. The subsidiary maintains its books in the British pound (GBP) as its functional currency. The relevant exchange rates for the $US value of the British pound (GBP) are as follows: BOY EDY tale Avg. rate $1.45 $1.52 $1.48 PPE purchase date rate $1.49 LTD barrowing date rate $1.49 Dividend rate $1.50 Historical rate (common stock and APIC) $0.55 HINT: For all parts of this problem, use a negative sign with your answers to indicate a reduction. a. Translate the subsidiary's income statement, statement of retained earnings, balance sheet, and statement of cash flows from British pounds (GBP) into $US (assume that the BOY Retained Earnings for the subsidiary is $2,926,035). Round answers in the "In US Dollars" column to the nearest whole number. (in GBP) Translation Rate US Dollars Income Statement Sale 3,150,000 Cost of goods sold (1,800,000) 1.48 $ 4,662,000 1.48 (2,797,200) Gross profit 1,260,000 1,864,800 Operating expenses (819,000) 1.48 (1,212,120) Net income 441,000 $ 652,680 Statement of retained earnings: BOY rings 1,653,750 $ 2,926,035 Net income Dividends EDY rings Balance sheet: Assets 441,000 (44,100) 2,050,650 652,680 1.5 (66,150) $ 3,512,565 Cash 896,490 1.52 $ 1,362,665 Accounts receivable 730,800 1.52 1,110,816 Inventory 938,700 1.52 1,426,824 Property, plant, and equipment (PPE), net 1,736,280 1.52 2,639,146 Total ass 4,302,270 $ 6,539,451 Liabilities and stockholders' equity Current liabilities 534,240 1.52 812,045 Long-term liabilities Common stock APIC Relearning 1,244,880 210,000 262,500 2,050,650 1.52 1,892,218 0.55 115,500 0.55 144,375 3512,565 Cumulative translation adjustment 62,148 4,302,270 $ 6,539,451 Total liabilities and equity Statement of cash flows: Net income 441,000 1.485 652,680 Change in accounts receivable (121,800) Change in inventories (156,450) Change in current liabilities 89,040 1.48 1.48 1.48 (180,264) (231,546) 131,779 Net cash from operating activities 251,790 372,649 Change in PPE, nel (161,280) 1.49 (240,307) Net cash from investing activities (161,2800 (240,307) Change in long-term debt 207480 Dividends (44,100) 1.49 1.5 309,145 (66,150) Net cash from financing activit 163,380 242,995 Net change in cash 253,890 375,337 Effect of exchange rate on cash 55,358 Beginning cash 642,600 1.45 931,770 Ending cash 896,490 1.52 $ 1,362,665 b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $102,848). What journal entry did the parent company make as a result of this computation? Round all answers to the nearest whole number. Direct computation of translation adjustment BOY net assets x (EDY - BOY exchange raS 148,838 Net income (EDY-Average exchange rate) Dividends x (EOY - Dividend exchange rat 17,640 (882) 165,596 BOY cumulative translation adjustment EDY cumulative translation adjustment (102,848) 62,748 General journal Description Debit Credit General journal Description Debit Credit Equity In Curan To record then adjustment for the year G27x G27 x cfollowing are selected financial statement accounts for the parent Income statement Cost of goods sold Grows profe Opening Glance sheet $13,815,000 (9,670,500) Ch 4,144,500 Accoursreceivable Givensory (2,621,50) Equity investment $1,500 12130 2000110 41301 Net income $2,172,230 Property plant, and equipment (PPE) 14,27 523875 Statement of retained earnings $11,000,000 Labilities and wackholequi 2,172,330 Camelb $102 Dividends (4750) Longb 750,000 Ending indearnings Statement of accum, comp. Income Ocutiverandan Cur-year at GOV ultranation adjustment $13,410 Comm APIC 10,048) Cumulative randasion adjustm 179506 576748 7,291,571 13.504410 Assume the following information: The purchase price for the subsidiary included an AAP as relating to land that the parent estimated was worth GBP200,000 more than its book value on the subsidiary's balance sheet. Confirm the balance of the Equity Investment account of $4,130,188 on the parent's balance shee Equity Commonk BOY andaming ROYAAP ROY Cumulation adjustment Equity income Curation me AAP Transname(ADC) 115,500 144,375 200603 100 Dividen 165,506 4,124, d. Using your translated subsidiary financial statements from Parta and the parent's financial data provided in Part, prepare the consolidation spreadsheet for the year. Income statement Cox of goods sold Parent Sub $1315,000 10570,500) Q2797,2001 Gros profe 4,144,500 LAGLAG Equity Income Nec income 2 (1212120 $2,172,305 Statement of retained earning $11,000,000 $2,026,035]] Dr 080-253 283 En C Consolidated $1,477,000 12467,700 $ 6,009,200 2,172,30 $11,000 2,172,330 7 Dividends GOV redearing Statement of Accumulated Comprehensive income: Ocean Curent-year 2,172,330 (175,000) $12594410 15 1x 150 $125 5/102,049) 5 (10280) = 179,506 1055060 2,788 x 1024 LOGO (102,848) * 187,GAGx 7x Qalance sheet: A Cach $1,536,5095 1,302,005 Accounts receivable Inventory Equity inven 200110 4129 410 752136 2002 304,000 Property, plans and equipment (PPC), ne 14271 2,634,6 304,000 1722 LOGO $375 bandholder equity Current abilities 1,106, 201 750,000 Comman 12,045 10,218 115,500 APIC Renderings 7,291,571 13504415 1425] 14375 3512 Cumulation adjument 76748 2,74 Toallabies and equity $27,100,157x LOGOS 2,642,218 7,291,571 12591410+ 7x | 4,316,296 5 43,2x $27,100,157x