Translation of financial statements

Assume that your company owns a subsidiary operating in France. The subsidiary conducts most of its business activities in the European Economic Union and maintains its books in the Euro as its functional currency. The subsidiary's financial statements (in ) for the most recent year follow in part a. below:

The relevant exchange rates ($:1) are as follows:

BOY rate	$1.17
EOY rate	$1.22
Avg. rate	$1.19
PPE purchase date rate	$1.20
LTD borrowing date rate	$1.20
Dividend rate	$1.21
Historical rate (common stock and APIC)	$0.98

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 $553,612).

Income Statement:	In Euros	Translation Rate	In US Dollars
Sales	1,350,000	Answer	Answer
Cost of goods sold	(810,000)	Answer	Answer
Gross profit	540,000		Answer
Operating expenses	(351,000)	Answer	Answer
Net income	189,000		Answer
Statement of Retained Earnings:
BOY retained earnings	708,750		Answer
Net income	189,000		Answer
Dividends	(18,900)	Answer	Answer
EOY retained earnings	878,850		Answer
Balance Sheet:
Assets
Cash	384,210	Answer	Answer
Accounts receivable	313,200	Answer	Answer
Inventory	402,300	Answer	Answer
Property, plant, and equipment (PPE), net	744,120	Answer	Answer
Total assets	1,843,830		Answer
Liabilities and stockholders' equity
Current liabilities	228,960	Answer	Answer
Long-term liabilities	533,520	Answer	Answer
Common stock	90,000	Answer	Answer
APIC	112,500	Answer	Answer
Retained earnings	878,850		Answer
AnswerCumulative translation adjustmentEffect of exchange rate on cash			Answer
Total liabilities and equity	1,843,830		Answer
Statement of Cash Flows:
Net income	189,000	Answer	Answer
Change in accounts receivable	(52,200)	Answer	Answer
Change in inventories	(67,050)	Answer	Answer
Change in current liabilities	38,160	Answer	Answer
Net cash from operating activities	107,910		Answer
Change in PPE, net	(69,120)	Answer	Answer
Net cash from investing activities	(69,120)		Answer
Change in long-term debt	88,920	Answer	Answer
Dividends	(18,900)	Answer	Answer
Net cash flows from financing activities	70,020		Answer
Net change in cash	108,810		Answer
Effect of exchange rate on cash			Answer
Beginning cash	275,400	Answer	Answer
Ending cash	384,210	Answer	Answer

b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $314,100.

Direct computation of translation adjustment:
AnswerBOY 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
AnswerBOY 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
AnswerBOY 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