Translation of financial statements Assume that your company owns a subsidiary operating in Mexico. The subsidiary maintains its books in the Mexican Peso as its functional currency. The subsidiary's financial statements (in Pesos) for the most recent year follow in a. below: The relevant exchange rates ($:Peso) are as follows: BOY rate $0.080 EOY rate $0.090 Avg. rate $0.085 PPE purchase date rate $0.086 LTD borrowing date rate $0.089 Dividend rate $0.087 Historical rate (common stock and APIC) $0.060 For both parts a. and b. beloW, use a negative sign with answers to indicate a reduction. a. Translate the subsidiary's income statement, statement of retained earnings, balance sheet, and statement of cash flows into $US using the current-rate method (assume that the BOY Retained Earnings is S70,503). Round all answers in the "in US Dollars" column to the nearest dollar Translation In US Dollars Income Statement: In Pesos Rate Sales 1,950,000 0.085 S *65,750 Cost of goods sold 11,1 /0,000; 0.085 (99,450) v Gros prell 780,000 66,300 Operating expenses (507,000) 0.085 (13,095) Net income $273,000 23.205 v Statement of Retained Earnings: BOY ret. earnings S1,023,750 70.503 v Ne incomn !000,27 23205 Dividerds 127,300; 0.087 (2,3/5) COY ret. earnings $1,269,450 91,333 v Balance Sheet: Assets Cash $554,970 0.09 S 49,947 Accounts receivable 152,100 0.09 10./16 Inventory Property, plant, and equipment (PPE), net Toctal assets 581,100 0.09 52.299 1,074,840 0.09 v 96.73G S2,663,310 Is 239,698 Liabili is and stckheoltlers' euity Current liabilities $330,/20 0.09 vs 29./65 v L-T liabilities 770,540 70,64.7 0.09 69,358 Common stocK 130,000 0.00 v 7,800 v 162,s00 0.06 v 9.750 v APIC Rel. rming 1,269,450 91,333 v Cumulative translation adjustment +v 30.193 X Tatal liabilities and ecuity $2,663,110 238.199 x Statement of Cash Flows: Net incorme $273,000 0.085 v $ 23,205 v Change in actounts receivable (75,400) 0.085 v (6,409) v Change in inventuries (96,850) 0.085 (8,232) v Change in current liabilities 55,120 0.085 v 4,685 Net cash from opcrating activities 155,870 13,249 Change in PPL, net (99,840) 0.086 v (8,586) Net cash from investing activities (99,840) (H,586) v Change in long-rerm deht 128,440 0.089 v 11,411 v Dividends (27,300) 0.087 v (2,375) v Net cash from financing activities 101,140 9,056 v Net change in cash 157,170 13,719 v Cumulative translation adjustment + x 4,405 x Beginning cash 397,800 0.08 v 31,824 v Ending cash $551,970 19,917 b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $17,246. Round the BOY net assets to reconcile the cumulative translation adjustment. Round all answers to the nearest dollar. Direct computation of translation adjustment: BOY net assets x (EOY - BOY exchange rates) v Net income x (EOY - Average exchange rate) Dividends x (EOY - Dividend exchange rate) BOY curmulalive trarslalion adjustment ECY curnulalive Lrarislalion adjustrment