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 follow in part a. below:

The relevant exchange rates for the $US value of the Brazilian real (R$) are as follows:

BOY rate	$0.26
EOY rate	$0.33
Avg. rate	$0.29
PPE purchase date rate	$0.30
LTD borrowing date rate	$0.30
Dividend rate	$0.31
Historical rate (common stock and APIC)	$0.14

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 $1,230,248).

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

Income statement:	In R$	Translation Rate	In US Dollars
Sales	3,000,000	Answer	Answer
Cost of goods sold	(1,800,000)	Answer	Answer
Gross profit	1,200,000		Answer
Operating expenses	(780,000)	Answer	Answer
Net income	420,000		Answer
Statement of retained earnings:
BOY ret. earnings	1,575,000		Answer
Net income	420,000		Answer
Dividends	(42,000)	Answer	Answer
EOY ret. earnings	1,953,000		Answer
Balance sheet:
Assets
Cash	853,800	Answer	Answer
Accounts receivable	696,000	Answer	Answer
Inventory	894,000	Answer	Answer
Property, plant, and equipment (PPE), net	1,653,600	Answer	Answer
Total assets	4,097,400		Answer
Liabilities and stockholders' equity
Current liabilities	508,800	Answer	Answer
L-T liabilities	1,185,600	Answer	Answer
Common stock	200,000	Answer	Answer
APIC	250,000	Answer	Answer
Ret. earnings	1,953,000		Answer
AnswerCumulative translation adjustmentEffect of exchange rate on cash			Answer
Total liabilities and equity	4,097,400		Answer
Statement of cash flows:
Net income	420,000	Answer	Answer
Change in accounts receivable	(116,000)	Answer	Answer
Change in inventories	(149,000)	Answer	Answer
Change in current liabilities	84,800	Answer	Answer
Net cash from operating activities	239,800		Answer
Change in PPE, net	(153,600)	Answer	Answer
Net cash from investing activities	(153,600)		Answer
Change in long-term debt	197,600	Answer	Answer
Dividends	(42,000)	Answer	Answer
Net cash from financing activities	155,600		Answer
Net change in cash	241,800		Answer
AnswerCumulative translation adjustmentEffect of exchange rate on cash			Answer
Beginning cash	612,000	Answer	Answer
Ending cash	853,800	Answer	Answer

b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $(766,748).

Round answers to the nearest dollar.

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

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