Translation of financial statements 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 subsidiarys financial statements (in BRL) for the most recent year: PLEASE SOLVE FOR A AND B

	(in BRL)			(in BRL)			(in BRL)
Income Statement:			Balance Sheet:			Statement of Cash Flows:
Sales	3,750,000		Assets			Net Income	525,000
Cost of Goods Sold	(2,250,000)		Cash	1,067,250		Change in accounts receivable	(145,000)
Gross profit	1,500,000		Accounts receivable	870,000		Change in inventories	(186,250)
Operating expenses	(975,000)		Inventory	1,117,500		Change in current liabilities	106,000
Net income	525,000		Property, plant, and			Net cash from operating activities	299,750
			equipment (PPE), net	2,067,000
			Total assets	5,121,750
Statement of retained earnings:						Change in PPE, net	(192,000)
BOY ret. earnings	1,968,750		Liabilities and stockholders equity			Net cash from investing activities	(192,000)
Net income	525,000		Curr. liabilities	636,000
Dividends	(52,500)		L-T liabilities	1,482,000		Change in long-term debt	247,000
EOY ret. earnings	2,441,250		Common stock	250,000		Dividends	(52,500)
			APIC	312,500		Net cash from financing activities	194,500
			Ret. earnings	2,441,250
			Total liabilities and equity	5,121,750		Net change in cash	302,250
						Beginning cash	765,000
						Ending cash	1,067,250

The relevant exchange rates for the $US value of the Brazilian real (R$) 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

For both parts a. and b. below, use a negative sign with answers to indicate a reduction.

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 $1,537,810).

Round all answers in the "In US Dollars" column to the nearest dollar.

Income statement:	In R$	Translation Rate	In US Dollars
Sales	3,750,000	Answer	$Answer
Cost of goods sold	(2,250,000)	Answer	Answer
Gross profit	1,500,000		Answer
Operating expenses	(975,000)	Answer	Answer
Net income	525,000		$Answer
Statement of retained earnings:
BOY ret. earnings	1,968,750		$Answer
Net income	525,000		Answer
Dividends	(52,500)	Answer	Answer
EOY ret. earnings	2,441,250		$Answer
Balance sheet:
Assets
Cash	1,067,250	Answer	$Answer
Accounts receivable	870,000	Answer	Answer
Inventory	1,117,500	Answer	Answer
Property, plant, and equipment (PPE), net	2,067,000	Answer	Answer
Total assets	5,121,750		$Answer
Liabilities and stockholders' equity
Current liabilities	636,000	Answer	$Answer
L-T liabilities	1,482,000	Answer	Answer
Common stock	250,000	Answer	Answer
APIC	312,500	Answer	Answer
Ret. earnings	2,441,250		Answer
Answer

			Answer
Total liabilities and equity	5,121,750		$Answer
Statement of cash flows:
Net income	525,000	Answer	$Answer
Change in accounts receivable	(145,000)	Answer	Answer
Change in inventories	(186,250)	Answer	Answer
Change in current liabilities	106,000	Answer	Answer
Net cash from operating activities	299,750		$Answer
Change in PPE, net	(192,000)	Answer	Answer
Net cash from investing activities	(192,000)		Answer
Change in long-term debt	247,000	Answer	Answer
Dividends	(52,500)	Answer	Answer
Net cash from financing activities	194,500		Answer
Net change in cash	302,250		Answer
Answer

			Answer
Beginning cash	765,000	Answer	Answer
Ending cash	1,067,250	Answer	$Answer

b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $(1,037,185).

Round answers to the nearest dollar.

Direct computation of translation adjustment:

Answer

	$Answer
Net income x (EOY - Average exchange rate)	Answer
Answer

	Answer
	Answer
Answer

	Answer
EOY cumulative translation adjustment	$Answer