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 $0.19 EOY rate $0.26 Avg. rate $0.22 PPE purchase date rate $0.23 LTD borrowing date rate $0.23 Dividend rate $0.24 Historical rate (common stock and APIC) $0.07 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 subsidiary's income statement, statement of retained earnings, balance sheet, and statement of cash flows into $US (assume that the BOY Retained Earnings is $617,400). 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 Translation Subsidiary (in RS) Rate (in $) 7,350,000 $ (4,410,000) $ 2,940,000 (1,911,000) $ 1,029,000 $617,400 Income statement Sales Cost of goods sold Gross profit Operating expenses Net income Statement of retained earnings BOY retained earnings Net income Dividends Ending retained earnings Balance sheet Assets Cash Accounts receivable Inventory Property, plant, and equipment, net 3,858,750 1,029,200 (102,900) $ 4,784,850 2,091,810 $ 1,705,200 $ 2,190,300 $ 4,051,320 $ 10,038,630 Liabilities and stockholders' equity Current liabilities Long-term liabilities Common stock APIC Retained earnings Cumulative translation adjustment 1,246,560 $ 2,904,720 $ 490,000 $ 612,500 $ 4,784,850 10,038,630 Statement of cash flows Net income Change in accounts receivable Change in inventories 1,029,000 $ (284,200) $ (365,050) $ Chan c urrent Habilitiae 207 760 Net cash from operating activities 587,510 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 (376,320) $ (376,320) 484,120 $ (102,900) $ 381,220 592,410 1,499,400 $ 2,091,810 $ b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $248,062. What journal entry did the parent company make as a result of this computation? (in R$) Change in rate (in $) BOY Net assets Net income Dividends Translation adjustment for the year BOY Cumulative Translation Adjustment EOY Cumulative Translation Adjustment General Journal Description Debit Credit To record translation adjustment for the year. 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 $0.19 EOY rate $0.26 Avg. rate $0.22 PPE purchase date rate $0.23 LTD borrowing date rate $0.23 Dividend rate $0.24 Historical rate (common stock and APIC) $0.07 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 subsidiary's income statement, statement of retained earnings, balance sheet, and statement of cash flows into $US (assume that the BOY Retained Earnings is $617,400). 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 Translation Subsidiary (in RS) Rate (in $) 7,350,000 $ (4,410,000) $ 2,940,000 (1,911,000) $ 1,029,000 $617,400 Income statement Sales Cost of goods sold Gross profit Operating expenses Net income Statement of retained earnings BOY retained earnings Net income Dividends Ending retained earnings Balance sheet Assets Cash Accounts receivable Inventory Property, plant, and equipment, net 3,858,750 1,029,200 (102,900) $ 4,784,850 2,091,810 $ 1,705,200 $ 2,190,300 $ 4,051,320 $ 10,038,630 Liabilities and stockholders' equity Current liabilities Long-term liabilities Common stock APIC Retained earnings Cumulative translation adjustment 1,246,560 $ 2,904,720 $ 490,000 $ 612,500 $ 4,784,850 10,038,630 Statement of cash flows Net income Change in accounts receivable Change in inventories 1,029,000 $ (284,200) $ (365,050) $ Chan c urrent Habilitiae 207 760 Net cash from operating activities 587,510 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 (376,320) $ (376,320) 484,120 $ (102,900) $ 381,220 592,410 1,499,400 $ 2,091,810 $ b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $248,062. What journal entry did the parent company make as a result of this computation? (in R$) Change in rate (in $) BOY Net assets Net income Dividends Translation adjustment for the year BOY Cumulative Translation Adjustment EOY Cumulative Translation Adjustment General Journal Description Debit Credit To record translation adjustment for the year