Translation of financial statements and consolidation of a foreign subsidiary (amortization of AAP) Assume that your company owns a subsidiary operating in Brazil. The subsidiary maintains its books in the Brazilian real (BRL) as its functional currency.

The relevant exchange rates for the $US value of the Brazilian real (BRL) are as follows:

BOY rate	$0.22
EOY rate	$0.29
Avg. rate	$0.25
PPE purchase date rate	$0.26
LTD borrowing date rate	$0.26
Dividend rate	$0.27
Historical rate (common stock and APIC)	$0.10

Round answers to the nearest dollar. Use rounded answers for subsequent calculations. Use negative signs with answers that are reductions (COGS, expenses, dividends, cash outflows, losses, etc.).

a. Translate the subsidiarys income statement, statement of retained earnings, balance sheet, and statement of cash flows into $US (assume that the BOY Retained Earnings is $649,373).

Use a negative sign with your answers in the "Subsidiary (in $)" column if corresponding figure in the "Subsidiary (in R$)" is shown in parenthesis. (Examples: Cost of goods sold, Operating expenses, Dividends and Changes in accounts in the Statement of Cash Flows)

	Subsidiary (in R$)	Translation Rate	Subsidiary (in $)
Income statement
Sales	6,510,000	Answer	Answer
Cost of goods sold	(3,906,000)	Answer	Answer
Gross profit	2,604,000		Answer
Operating expenses	(1,692,600)	Answer	Answer
Net income	911,400		Answer
Statement of retained earnings
BOY retained earnings	3,417,750		$649,373
Net income	911,400		Answer
Dividends	(91,140)	Answer	Answer
Ending retained earnings	4,238,010		Answer
Balance sheet
Assets
Cash	1,852,746	Answer	Answer
Accounts receivable	1,510,320	Answer	Answer
Inventory	1,939,980	Answer	Answer
Property, plant, and equipment, net	3,588,312	Answer	Answer
	8,891,358		Answer
Liabilities and stockholders' equity
Current liabilities	1,104,096	Answer	Answer
Long-term liabilities	2,572,752	Answer	Answer
Common stock	434,000	Answer	Answer
APIC	542,500	Answer	Answer
Retained earnings	4,238,010		Answer
Cumulative translation adjustment	-		Answer
	8,891,358		Answer
Statement of cash flows
Net income	911,400	Answer	Answer
Change in accounts receivable	(251,720)	Answer	Answer
Change in inventories	(323,330)	Answer	Answer
Change in current liabilities	184,016	Answer	Answer
Net cash from operating activities	520,366		Answer
	-
Change in PPE, net	(333,312)	Answer	Answer
Net cash from investing activities	(333,312)		Answer
Change in long-term debt	428,792	Answer	Answer
Dividends	(91,140)	Answer	Answer
Net cash from financing activities	337,652		Answer
Net change in cash	524,706		Answer
Effect of exchange rate on cash			Answer
Beginning cash	1,328,040	Answer	Answer
Ending cash	1,852,746	Answer	Answer

b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $219,711. What journal entry did the parent company make as a result of this computation?

	(in R$)	Change in rate	(in $)
BOY Net assets	Answer	Answer	Answer
Net income	Answer	Answer	Answer
Dividends	Answer	Answer	Answer
Translation adjustment for the year			Answer
BOY Cumulative Translation Adjustment			Answer
EOY Cumulative Translation Adjustment			Answer

General Journal
Description	Debit	Credit
AnswerEquity incomeEquity investmentOther comprehensive incomeOther comprehensive loss	Answer	Answer
AnswerEquity incomeEquity investmentOther comprehensive incomeOther comprehensive loss	Answer	Answer
To record translation adjustment for the year.