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 $0.97 EOY rate $1.06 Avg. rate PPE purchase date rate $1.02 LTD borrowing date rate $1.05 Dividend rate $1.04 Historical rate (common stock and API $0.65 $1.03 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 $317.562. Round all answers to the nearest dollar (for part a. only). Translation Rate 1.03 $ 1.03 In Euros 750,000 (450,000) 300,000 (195,000) 105,000 in US Dollars 772,500 (463,500) 309,000 (200,850) 108,150 1.03 $ $ 393,750 105,000 (10.500) 488,250 317,562 108,150 (10,920) 414,792 1.04 $ Income Statement: Sales Cost of goods sold Gross profit Operating expenses Net income Statement of Retained Earnings: BOY ret. earnings Net income Dividends EOY ret, earnings Balance Sheet: Assets Cash Accounts receivable Inventory Property, plant, and equipment (PPE), net Total assets Liabilities and stockholders' equity Curr liabilities L-T liabilities Common stock APIC Ret, earnings Cumulative translation adjustment Total liabilities and equity 213,450 174,000 223,500 413,400 1,024,350 1.06 $ 226,257 1.06 184,440 1.06 236,910 1.06 438,204 $ 1,085,811 1.06 $ 1.06 127,200 295,400 50,000 62,500 488,250 0.65 134,832 314,184 32,500 40,625 OX 0.65 1,024,350 0 X 1,024,350 $ 1,085,811 $ 127,200 296,400 50,000 62,500 488,250 1.06 1.06 0.65 134,832 314,184 32,500 40,625 Ox 0.65 0 x 1,024,350 $ 1.03 Total assets Liabilities and stockholders' equity Curr.liabilities L-T liabilities Common stock APIC Ret. earnings Cumulative translation adjustment Total liabilities and equity Statement of Cash Flows: Net income Change in accounts receivable Change in inventories Change in current liabilities Net cash from operating activities 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 1.03 1.03 1.03 105,000 (29,000) (37,250) 21,200 59,950 (38,400) (38,400) 49,400 (10,500) 38,900 60,450 108,150 (29,870) (38,368) 21,836 59,950 X (39,168) 0 X 1.02 1.05 1.04 51,870 (10,920) 38,900 x 60,450 X 0 X 148,410 0 x 0.97 153,000 213,450 b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $100,375.50. Do not round your answers for part b. Direct computation of translation adjustment: BOY net assets x (EOY - BOY exchange - $ Ox Net income (EOY - Average exchange rate) OX Dividends x (EOY - Dividend exchange OX BOY cumulative translation adjustme 0 x EOY cumulative translation adjustment OX