Under TEMPORAL method

Daisan Company was created as a wholly owned subsidiary of Avioco Corporation on January January 1, Year 1 $0.95 1, Year 1. On that date, Avioco invested $57,000 in Daisan's capital stock. Given the Average for Year 1 0.90 exchange rate on that date of $0.95 per Brazilian Reals (BRL), the initial investment of December 31, Year 1 0.85 $57,000 was converted into 60,000 BRL. Other than the capital investment on January 1, there Average for Year 2 0.82 were no transactions involving stockholders' equity in Year 1. Daisan's BRL-denominated December 1, Year 2 0.81 financial statements for Year 2 are as follows: December 31, Year 2 0.80 Income Statement Required: Year 2 A. Translate Daisan Company's Year 2 financial statements into dollars (By BRL) using Temporal Method. Sales 650,000 B. Compute the translation adjustment for Year 2. Cost of goods sold (320,000) C. Explain why the sign of the translation adjustment in (B) is positive or Gross profit 330,000 negative. Operating expenses 97,000 Income before tax 233,000 Income taxes (69,900) Net income 163,100 Statement of Retained Earnings Year 2 (By BRL) Retained earnings, 1/1/Y2 255,000 Net income 163,100 Dividends (paid on 12/1/Y2) (50,000) Retained earnings, 12/31/Y2 368.100 Balance Sheet December 31, Year 2 (By BRL) Cash 80,100 Receivables 100,000 Inventory 80,000 Plant & Equipment (net) 400,000 Less: Accumulated depreciation (60,000 Total assets 600.100 Liabilities 172,000 Capital stock 60,000 Retained earnings, 12/31/Y2 368,100 Total liabilities & Stockholders' equity 600,100 The BRL is the primary currency that Daisan uses in its day-to-day operations. The BRL has steadily fallen in value against the dollar since Avioco made the investment in Daison on January 1, Year 1. Relevant exchange rates for the BRL for Years 1 and 2 are as follows