Translation of financial statements Assume that your company owns a subsidiary operating in Canada. The subsidiary maintains its books in the Canadian Dollar (CAD) as its functional currency. Following are the subsidiary's financial statements (in CAD) for the most recent year: The relevant exchange rates ($:CAD) are as follows: BOY rate $0.79 EOY rate $0.85 Avg. rate $0.82 PPE purchase date rate $0.83 LTD borrowing date rate $0.83 Dividend rate $0.84 Historical rate (common stock and APIC) $0.69 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 (assume that the BOY Retained Earnings is $676,636). Round all answers in the "in US Dollars" column to the nearest dollar. Translation In In CADs Rate US Dollars 1,650,000 $ 0 $ (990,000) $ 0 660,000 (429,000) $ 231,000 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: 0 866,250 231,000 (23,100) $ 1,074,150 $ 0 Assets Cash $ Accounts receivable $469,590 $ 382,800 $ 491,700 $ 909,480 $ $2,253,570 0 0 0 Inventory Property, plant, and equipment (PPE), net Total assets Liabilities and stockholders' equity Current liabilities L-T liabilities Common stock APIC 0 $ $279,840 652,080 110,000 137,500 Common stock APIC Ret. earnings 110,000 137,500 1,074,150 $2,253,570 $ 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 $231,000 (63,800) (81,950) 46,640 131,890 (84,480) (84,480) 108,680 (23,100) 85,580 132,990 0 Beginning cash Ending cash 336,600 $469,590 0 0 $ b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $32,452. Round all answers to the nearest dollar. Direct computation of translation adjustment: $ Net income x (EOY - Average exchange rate) 0 EOY cumulative translation adjustment Translation of financial statements Assume that your company owns a subsidiary operating in Canada. The subsidiary maintains its books in the Canadian Dollar (CAD) as its functional currency. Following are the subsidiary's financial statements (in CAD) for the most recent year: The relevant exchange rates ($:CAD) are as follows: BOY rate $0.79 EOY rate $0.85 Avg. rate $0.82 PPE purchase date rate $0.83 LTD borrowing date rate $0.83 Dividend rate $0.84 Historical rate (common stock and APIC) $0.69 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 (assume that the BOY Retained Earnings is $676,636). Round all answers in the "in US Dollars" column to the nearest dollar. Translation In In CADs Rate US Dollars 1,650,000 $ 0 $ (990,000) $ 0 660,000 (429,000) $ 231,000 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: 0 866,250 231,000 (23,100) $ 1,074,150 $ 0 Assets Cash $ Accounts receivable $469,590 $ 382,800 $ 491,700 $ 909,480 $ $2,253,570 0 0 0 Inventory Property, plant, and equipment (PPE), net Total assets Liabilities and stockholders' equity Current liabilities L-T liabilities Common stock APIC 0 $ $279,840 652,080 110,000 137,500 Common stock APIC Ret. earnings 110,000 137,500 1,074,150 $2,253,570 $ 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 $231,000 (63,800) (81,950) 46,640 131,890 (84,480) (84,480) 108,680 (23,100) 85,580 132,990 0 Beginning cash Ending cash 336,600 $469,590 0 0 $ b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $32,452. Round all answers to the nearest dollar. Direct computation of translation adjustment: $ Net income x (EOY - Average exchange rate) 0 EOY cumulative translation adjustment
