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 sus value of the British pound (GBP) are as follows: BOY rate $1.45 EOY rate $1.52 Ave rate $1.48 PPE purchase date rate $1.49 LTD borrowing 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 sigo 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 SUS (assume that the BOY Retained Earnings for the subsidiary is 52,926,035). Round answers in the "In US Dollars column to the nearest whole number Translation In (in GBP) Rate US Dollars Income Statement Sales 3,150.000 05 0 Cost of goods sold (1,890.000) 0 0 Gross profit 1.260.000 0 Operating expenses (819,000) 0 0 Net income 441.000 $ 0 Statement of retained earnings: BOY ret, earnings 1.653.750 5 Net income 441.000 Dividends (44.100) 0 EOY ret, earnings 2.050.650 5 Balance sheet: Assets Cash 896.490 0 Accounts receivable 730.800 0 Inventory 938.700 0 Property, plant and equipment (PPE).net 1.736.280 Total assets 4.302270 Liabilities and stockholders' equity Current liabilities 534 240 DS OS OOOO OOO 0 NA 0 534,240 0 $ Current liabilities Long-term liabilities Common stock APIC Ret. earnings 1.244,880 210,000 262.500 2,050.650 O O O O O Olo 4,302,270 $ 0 $ O O OOO 0 441,000 (121,800) (156,450) 89,040 251.790 (161.280) (161,280) 207,480 (44.100) 163.380 253,890 0 Total liabilities and equity Statement of cash flows: Net income Change in accounts receivable Change in inventories Change in current liabilities Net cash from operating activities Change in PPE, net Net cash from investing activities Change in long-term debt Dividends Net cash from financing activities Net change in cash Effect of exchange rate on cash Beginning cash Ending cash 0 0 0 O O 0 GOOOolo 0 642.600 896,490 0 OS b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY bala parent company make as a result of this computation? Round all answers to the nearest whole number. Direct computation of translation adjustment: $ Net income (EOY - Average exchange rate) OOOOOO 0 $ EOY cumulative translation adjustment General Journal Description Debit Credit D D To record the translation adjustment for the year O $1,526,569 C. Following are selected financial statement accounts for the parent: Income statement: Balance sheet: Sales $13,815,000 Assets Cost of goods sold (9.670,500) Cash Gross profit 4,144.500 Accounts receivable Equity income 652,680 Inventory Operating expenses (2.624,850) Equity investment Net income 52. 172,330 Property, plant and equipment (PPE), net 1,768,320 2,680,110 4,139,188 14,273,658 $24,387.845 Statement of retained earnings: BOY retained earnings 511.898,000 Liabilities and stockholders' equity Net income 2.172,330 Current liabilities Dividends (475,920) Long-term liabilities Ending retained earnings $13.594.410 Common stock APIC Statement of accum. comp. income: Retained earnings BOY cumulative translation adjustment $(102.848) Cumulative translation adjustment Current-year translation gain (loss) 179,596 EOY cumulative translation adjustment $76,748 $1,106.582 750,000 1,568,535 7.291.571 13,594,410 76,748 $24,387,845 0 Assume the following information: The purchase price for the subsidiary included an AAP asset relating to Land estimated was worth GBP200,000 more than its book value on the subsidiary's balance sheet. Confirm the balar Investment account of $4,139,188 on the parent's balance sheet. Equity Investment BOY Common stock BOY APIC BOY Retained earnings BOY AAP BOY Cumulative translation adjustment 0 Equity income 0 Dividends Current translation adjustment AAP Translation adjustment (AOC) Balance OO 0 0 0 oooooo 0 0 0 0 OOO OOOOOO olo Oo oo OOOO d. Using your translated subsidiary financial statements from Parta and the parent's financial data provided in Part c, prepare consolidation spreadsheet for the year. Elimination Entries Parent Sub Dr Cr Consolidated Income statement Sales $13.815.000 $ $ Cost of goods sold (9.670.500) Gross profit 4144,500 5 Equity income 652.680 [C] 0 Operating expenses (2.624,850) Net income 52.172.330 $ $ Statement of retained earnings: BOY retained earnings $11.898,000 $ 0 [E] 0 $ Net Income 2.172.330 Dividends (475.920) O a EOY retained earnings $13,594,410 5 $ Statement of Accumulated Comprehensive Income: BOY cumulative translation adjustment $(102.948) $ OLE)S Current-year translation gain (loss) 179.596 0 C O ID EOY cumulative translation adjustment $76.748 5 5 Balance sheet: Assets Cash $1,526,569 5 0 Accounts receivable 1.768,320 Inventory 2.680,110 Equity investment 4.139.188 0 C 0 IE) OTA Property, plant and equipment (PPE), net 14.273,658 0 A 0 O D 0 Total assets $24.387.845 5 0 0 Liabilities and stockholders equity Current liabilities 1.106.581 0 Long-term liabilities 750,000 Common stock 1,568,535 APIC 7.291,571 0 [E 0 Retained earnings 13,594 410 Cumulative translation adjustment 76,748 0 0 Total liabilities and equity 524 387,845 5 0 $ OS 0 $ 0 OOO OOO DOO O (E) 0 0 0