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: PLeASE SOLVE FOR JUST B
(in CAD) | (in CAD) | (in CAD) | |||||
---|---|---|---|---|---|---|---|
Income Statement: | Balance Sheet: | Statement of Cash Flows: | |||||
Sales | 1,350,000 | Assets | Net Income | 189,000 | |||
Cost of Goods Sold | (810,000) | Cash | 384,210 | Change in accounts receivable | (52,500) | ||
Gross profit | 540,000 | Accounts receivable | 313,200 | Change in inventories | (67,050) | ||
Operating expenses | (351,000) | Inventory | 402,300 | Change in current liabilities | 38,160 | ||
Net income | 189,000 | Property, plant, and | Net cash from operating activities | 107,910 | |||
equipment (PPE), net | 744,120 | ||||||
Total assets | €1,843,830 | ||||||
Statement of retained earnings: | Change in PPE, net | (69,120) | |||||
BOY ret. earnings | 708,750 | Liabilities and stockholders’ equity | Net cash from investing activities | (69,120) | |||
Net income | 189,000 | Curr. liabilities | 228,960 | ||||
Dividends | (18,900) | L-T liabilities | 533,520 | Change in long-term debt | 88,920 | ||
EOY ret. earnings | 878,850 | Common stock | 90,000 | Dividends | (18,900) | ||
APIC | 112,500 | Net cash from financing activities | 70,020 | ||||
Ret. earnings | 878,850 | ||||||
Total liabilities and equity | 1,843,830 | Net change in cash | 108,810 | ||||
Beginning cash | 275,400 | ||||||
Ending cash | 384,210 |
The relevant exchange rates ($:CAD) are as follows:
BOY rate | $0.70 |
EOY rate | $0.76 |
Avg. rate | $0.73 |
PPE purchase date rate | $0.74 |
LTD borrowing date rate | $0.74 |
Dividend rate | $0.75 |
Historical rate (common stock and APIC) | $0.60 |
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 $553,612).
Round all answers in the "in US Dollars" column to the nearest dollar.
Income Statement: |
In CADs |
Translation Rate |
In US Dollars |
---|---|---|---|
Sales | 1,350,000 | $Answer | $Answer |
Cost of goods sold | (810,000) | $Answer | Answer |
Gross profit | 540,000 | Answer | |
Operating expenses | (351,000) | $Answer | Answer |
Net income | 189,000 | $Answer | |
Statement of Retained Earnings: | |||
BOY ret. earnings | 708,750 | $Answer | |
Net income | 189,000 | Answer | |
Dividends | (18,900) | $Answer | Answer |
EOY ret. earnings | 878,850 | $Answer | |
Balance Sheet: | |||
Assets | |||
Cash | $384,210 | $Answer | $Answer |
Accounts receivable | 313,200 | $Answer | Answer |
Inventory | 402,300 | $Answer | Answer |
Property, plant, and equipment (PPE), net | 744,120 | $Answer | Answer |
Total assets | $1,843,830 | $Answer | |
Liabilities and stockholders' equity | |||
Current liabilities | $228,960 | Answer | $Answer |
L-T liabilities | 533,520 | Answer | Answer |
Common stock | 90,000 | Answer | Answer |
APIC | 112,500 | Answer | Answer |
Ret. earnings | 878,850 | Answer | |
Answer |
Answer | |||
Total liabilities and equity | $1,843,830 | $Answer | |
Statement of Cash Flows: | |||
Net income | $189,000 | Answer | $Answer |
Change in accounts receivable | (52,200) | Answer | Answer |
Change in inventories | (67,050) | Answer | Answer |
Change in current liabilities | 38,160 | Answer | Answer |
Net cash from operating activities | 107,910 | Answer | |
Change in PPE, net | (69,120) | Answer | Answer |
Net cash from investing activities | (69,120) | Answer | |
Change in long-term debt | 88,920 | Answer | Answer |
Dividends | (18,900) | Answer | Answer |
Net cash from financing activities | 70,020 | Answer | |
Net change in cash | 108,810 | Answer | |
Answer |
Answer | |||
Beginning cash | 275,400 | Answer | Answer |
Ending cash | $384,210 | Answer | $Answer |
b. Compute the ending Cumulative Translation Adjustment directly,
assuming a BOY balance of $(37,237).
Round all answers to the nearest dollar.
Direct computation of translation adjustment: | |
Answer |
$Answer | |
Net income x (EOY - Average exchange rate) | Answer |
Answer |
Answer | |
Answer | |
Answer |
Answer | |
EOY cumulative translation adjustment | $Answer |
Translation of financial statements Assume that your company owns a subsidiary operating in Canada. The subsidiary...
Translation of financial statements and consolidation of a foreign subsidiary (no amortization of AAP) Assume that your company owns a subsidiary operating in Great Britain. The subsidiary maintains its books in the British pound (GBP) as its functional currency. Following are the subsidiary’s financial statements (in GBP) for the most recent year: (in GBP) (in GBP) (in GBP) Statement of Cash Flows: Net Income Change in accounts Income Statement: Balance Sheet: Sales 2,730,000 Assets 382,200 (1,638,000) Cash 776,958 (105,560) (135,590)...
Assume that our company owns a subsidiary operating in Switzerland. The subsidiary has adopted the Swiss Franc (CHF) as its functional currency. Our company operates this subsidiary like a division or branch office, making all of its operating decisions, including pricing its products. We conclude, therefore, that the functional currency of this subsidiary is the $US and that its financial statements must be remeasured prior to consolidation. Following are the subsidiary’s financial statements (in CHF) for the most recent year:...
Assume the following information: The purchase price for the subsidiary included an AAP asset relating to a Patent that the parent estimated was worth BRL300,000 more than its book value on the subsidiary's balance sheet. The Patent is being amortized at the rate of BRL30,000 per year and the BOY book value of the Patent is BRL270,000. 1. Compute the balance of the Equity Investment account of $1,593,111 on the parent's balance sheet. Use a negative sign with answers that...
Assume that on 1/1/X0, a parent company acquires a 70% interest in its subsidiary for a price at $480,000 over book value. The excess is assigned as follows: Asset Fair Value Useful Life Patent $320,000 8 years Goodwill 160,000 Indefinite 70% of the goodwill is allocated to the parent. Included in the attached Excel spreadsheet are the pre-consolidation financial statements for both the parent and the subsidiary. Submission Requirements: Prepare the consolidated financial statements at 12/31/X6 by placing the appropriate...
Inferring consolidation entries from consolidated financial statements—Cost method Assume a parent company acquired a subsidiary on January 1, 2012. The purchase price was $1,312,000 in excess of the subsidiary’s book value of Stockholders’ Equity on the acquisition date, and that excess was assigned to the following [A] assets: [A] Asset Original Amount Original Useful Life Property, plant and equipment (PPE), net $300,000 20 years Patent 432,000 12 years Goodwill 580,000 Indefinite $1,312,000 The parent company uses the cost method of...
Consolidation several years subsequent to date of acquisition—Equity method Assume a parent company acquired a subsidiary on January 1, 2017. The purchase price was $820,000 in excess of the subsidiary’s book value of Stockholders’ Equity on the acquisition date, and that excess was assigned to the following [A] assets: [A] Asset Original Amount Original Useful Life Property, plant and equipment (PPE), net $240,000 12 years Patent 240,000 8 years License 160,000 10 years Goodwill 180,000 Indefinite $820,000 The [A] assets...
Determining ending consolidated balances in the second year following the acquisition—Equity method Assume that your company acquired a subsidiary on January 1, 2012. The purchase price was $650,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following [A] assets: [A] Asset Original Amount Original Useful Life (years) Property, plant and equipment (PPE), net $325,000 20 Goodwill 325,000 Indefinite $650,000 The AAP asset relating to undervalued PPE with...
Translation of financial statements A U.S.-based MNC has a subsidiary in France (local currency, euro, €). The balance sheet and income statement of the subsidiary follow: : On December 31, 2019, the exchange rate is US$1.17/€. Assume that the local (euro) figures for the statements remain the same on December 31, 2020. Calculate the U.S. dollar-translated figures for the two ending time periods, assuming that between December 31, 2019 and December 31, 2020, the euro has appreciated against the U.S....
Inferring consolidation entries from consolidated financial statements-Cost method Assume a parent company acquired a subsidiary on January 1, 2012. The purchase price was $1,362,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following [A] assets [A] Asset Property, plant and equipment (PPE), net Patent Goodwill Original Amount Original Useful Life 20 years 12 years Indefinite $300,000 432,000 630,000 $1,362,000 The parent company uses the cost method of...
Determining ending consolidated balances in the third year following the acquisition—Equity method Assume that your company acquired a subsidiary on January 1, 2017. The purchase price was $900,000 in excess of the subsidiary’s book value of Stockholders’ Equity on the acquisition date, and that excess was assigned to the following [A] assets: [A] Asset Original Amount Original Useful Life Patent $600,000 10 years Goodwill 300,000 Indefinite $900,000 The [A] assets with a useful life have been amortized as part of...