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. Following are the subsidiarys financial statements (in GBP) for the most recent year:

	(in GBP)			(in GBP)			(in GBP)
Income Statement:			Balance Sheet:			Statement of Cash Flows:
Sales	2,730,000		Assets			Net Income	382,200
Cost of Goods Sold	(1,638,000)		Cash	776,958		Change in accounts receivable	(105,560)
Gross profit	1,092,000		Accounts receivable	633,360		Change in inventories	(135,590)
Operating expenses	(709,800)		Inventory	813,540		Change in current liabilities	77,168
Net income	382,200		Property, plant, and			Net cash from operating activities	218,218
			equipment (PPE), net	1,504,776
			Total assets	3,728,634
Statement of retained earnings:						Change in PPE, net	(139,776)
BOY ret. earnings	1,433,250		Liabilities and stockholders equity			Net cash from investing activities	(139,776)
Net income	382,200		Curr. liabilities	463,008
Dividends	(38,220)		L-T liabilities	1,078,896		Change in long-term debt	179,816
EOY ret. earnings	1,777,230		Common stock	182,000		Dividends	(38,220)
			APIC	227,500		Net cash from financing activities	141,596
			Ret. earnings	1,777,230
			Total liabilities and equity	3,728,634		Net change in cash	220,038
						Beginning cash	556,920
						Ending cash	776,958

The relevant exchange rates for the $US value of the British pound (GBP) are as follows:

BOY rate	$1.50
EOY rate	$1.57
Avg. rate	$1.53
PPE purchase date rate	$1.54
LTD borrowing date rate	$1.54
Dividend rate	$1.55
Historical rate (common stock and APIC)	$0.60

b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $(17,474). 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:
AnswerEquity InvestmentCumulative Translation AdjustmentBOY cumulative translation adjustmentBOY net assets x (EOY - BOY exchange rates)BOY net assets x BOY exchange rateNet income x (EOY - Average exchange rate)Net income x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net assets x EOY exchange rateEOY cumulative translation adjustmentTranslation adjustment for the year	$Answer
Net income x (EOY - Average exchange rate)	Answer
AnswerEquity InvestmentCumulative Translation AdjustmentBOY cumulative translation adjustmentBOY net assets x (EOY - BOY exchange rates)BOY net assets x BOY exchange rateNet income x (EOY - Average exchange rate)Net income x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net assets x EOY exchange rateEOY cumulative translation adjustmentTranslation adjustment for the year	Answer
	Answer
AnswerEquity InvestmentCumulative Translation AdjustmentBOY cumulative translation adjustmentBOY net assets x (EOY - BOY exchange rates)BOY net assets x BOY exchange rateNet income x (EOY - Average exchange rate)Net income x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net assets x EOY exchange rateEOY cumulative translation adjustmentTranslation adjustment for the year	Answer
EOY cumulative translation adjustment	$Answer

General Journal
Description	Debit	Credit
AnswerEquity InvestmentCumulative Translation AdjustmentBOY cumulative translation adjustmentBOY net assets x (EOY - BOY exchange rates)BOY net assets x BOY exchange rateNet income x (EOY - Average exchange rate)Net income x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net assets x EOY exchange rateEOY cumulative translation adjustmentTranslation adjustment for the year	Answer	Answer
AnswerEquity InvestmentCumulative Translation AdjustmentBOY cumulative translation adjustmentBOY net assets x (EOY - BOY exchange rates)BOY net assets x BOY exchange rateNet income x (EOY - Average exchange rate)Net income x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net assets x EOY exchange rateEOY cumulative translation adjustmentTranslation adjustment for the year	Answer	Answer
To record the translation adjustment for the year