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Blue Sky Corporation, a U$.$S$.-$based company, invested $11$ million Polish zloty in

Green Mountain Company in Lodz, Poland, on January $1,$ Year $2,$ when the

exchange rate for the Polish zloty $($PLN$)$ was $$0\mathrm{.}20.$ $$2\mathrm{.}5$ million of the $$11$M

zloty was recorded in Common Stock and $$8\mathrm{.}5$ million was recorded in

Additional Paid in Capital. The financial statements of Green Mountain as of

December $31,$ Year $2,$ one year later, are presented on the following page:

Additional information:

$$ The December $31,$ Year $2,$ ending inventory of PLN $6,150,000$ was

acquired evenly throughout the fourth quarter of Year. The January $1,$

Year $2$ beginning inventory was zero.

$$ All fixed assets were on the books when the subsidiary was acquired as

follows:

o PLN $12,500,000$ of equipment which was acquired on January $3,$

Year $2$

o PLN $17,000,000$ in buildings and PLN $2,000,000$ in land was

acquired on August $5,$ Year

o An Additional PLN $500,000$ of land was acquired on December $15.$

o An Additional PLN $1,500,000$ of land was acquired on December

$20.$

$$ Dividends were declared and paid on December $15,$ Year $2$

$$ Exchange rates for Year $2$ are:

January $1,$ Year $20\mathrm{.}20$

January $3,$ Year $20\mathrm{.}18$

Average Year $2$: $0\mathrm{.}175$

August $5,$ Year $2$: $0\mathrm{.}15$

Fourth quarter, Year $2$: $0\mathrm{.}17$

December $15,$ Year $2$: $0\mathrm{.}14$

December $20,$ Year $2$: $0\mathrm{.}17$

December $31,$ Year $2$: $0\mathrm{.}185$

$$

The Year $2$ financial statements for Green Mountain Company are on the next

page.

Income Statement and Statement of Retained Earnings PLN

Sales $17,000,000$

Cost of goods sold $-7,000,000$

Depreciation expense$-$equipment $-1,250,000$

Depreciation expense$-$building $-900,000$

Research and development expense $-700,000$

Other expenses $($including taxes$)-400,000$

Income before remeasurement gain $6,750,000$

Remeasurement gain$/$loss$,$ Year $2-$

Net income $6,750,000$

Plus: Retained earnings, $1/1/$Y$2$: $0$

Less: Dividends paid $-850,000$

Retained earnings, $12/31/$Y$25,900,000$

Balance Sheet

Cash $4,000,000$

Accounts receivable $($net$)1,650,000$

Inventory $6,150,000$

Equipment $12,500,000$

Less: accumulated depreciation $-1,250,000$

Building $17,000,000$

Less: accumulated depreciation $-900,000$

Land $4,000,000$

Total assets $43,150,000$

Accounts payable $1,250,000$

Long$-$term debt $25,000,000$

Common stock $2,500,000$

Additional paid$-$in capital $8,500,000$

Retained earning: $5,900,00$

AOCI Translation Gain Adjustment

Total $43,150,000$

Required

$1.$ Translate Green Mountain$$s financial statements into U$.$S$.$ dollars in

accordance with U$.$S$.$ GAAP at December $31,$ Year $2$ and prove out the

Foreign Exchange gain or loss through a reconciliation schedule:

a$.$ Assuming the Polish zloty is the functional currency.

b$.$ Assuming the U$.$S$.$ dollar is the functional currency.

Please provide schedules for any calculations for any account that is a mix rate

$($i$.$e$.,$ cost of goods sold$).$