Question

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) 77,168 Cost of Goods Sold receivable Change in inventories Change in current liabilities Net cash from operating Gross profit 1,092,000 Accounts receivable 633,360 Operating expenses (709,800) Inventory 813,540 382,200 Net income Property, plant, and 218,218 activities equipment (PPE), net 1,504,776 Total assets 3,728,634 Statement of retained Change in PPE, net (139,776) earnings Liabilities and stockholders equity Net cash from investing activities BOY ret. earnings 1,433,250 (139,776) Net income 382,200 Curr. liabilities 463,008 Dividends (38,220 L-T liabilities 1,078,896 Change in long-term debt 179,816 EOY ret. earnings 1,777,230 Common stock 182,000 Diidends (38,220) Net cash from financing activities 227,500 1,777,230 3,728,634 Net change in cash APIC 141,596 Ret. earnings Total liabilities and equity 220,038 556,920 776,958 Beginning cash Ending cash The relevant exchange rates for the $US value of the British pound (GBP) are as follows BOY rate EOY rate Avg. rate PPE purchase date rate LTD borrowing date rate Dividend rate $1.50 $1.57 $1.53 $1.54 $1.54 $1.55 Historical rate (common stock and APIC) $0.60 HINT: For all parts of this problem, use a negative sign with your answers to indicate a reduction. Elimination Entries Dr Cr Consolidated 0 X 0 X 584,766 0 X 2,535,897 0 X 59,241 0 X (17,474) 157,517 14,000 0 X 0 X 0 X 0 X 683,042 2,764,123 300,000 300,000 4,000 0 X 0 X 09,200 0 X 36,500 0 X 0 X 0 X 3,820,406$3,820,406 0 X

Answer 1

Given Inlosmbtion hesellooing ase éhe Subsidiasy's nancial stalements (in GBP sansactions Otu: Tansplation n sticula oll cs 2,730,00053 (,176,400 l, 638,0oo01- 53 (2,506 140 1, 670, 76tO 704 80)l58 ,08,y 584,766 Income Statement :- Gales -J Cosl of goods sold Opesalinq espenses 3g2,20o Nek Incone imed Canmas Bey setained easnings Net ncome ,433, 250 given 2,535,897 382,200 as aboe584,766 59,241 3,061, 422 (-Dividends Eoy selained easnings ,77I, 2.3d Balance Sheel fi Assets : Cash iccovnts xeceivable Invenbos 1.5フ \1,219, 824 776,958 633, 360. 57 813,SuOS7 1,504,776 aq4, 375 1,27725S 2,862,498 5,853,955 pesty , Plant and с9cipinen, nel 1.57 Total Assels 3,72863

(Liabilithes and stockholdes's eguity Cussent Liabilibies 463,008S7726,423 , 078, 8657 l,643, 867 toa, 20d 136, Soo 3061, 422 182,000 6 227 500O.G 1,777 230 Common stock APIC Relained easnings Answes cumulalive hoanisalation adjstment efe of exchange on Cas 5,85395s-726,423-1,693,867 104,200 136,500 3,o6f, 422 3,728,G31 5,853,955 Total Liabilities Skatement o cosh flows: Net ncome (-Jchange in accovnts seceivable,565 C)change in nventostes 382,20053 58y,766 Gi, 507 207.us3 135,590!.53 Change in cussent labilities 77/685Sis, o6-7 Net cosh foom Opesatir, 333,674 activities2l8, 2/8 change in PPE, neb Net cash fsominvestin 34,77654 215 255 octivities134,776 215-255

change n Leng - lesm debt174,8/6276.917 38,2205S59,241 217, 676 336,294 48,150 -Dividends Net cash som financing actvitias 1,56 Net change in cash Effed of exchange sate of ash 220,038 ,824-336,244-835,380 Beginning Cash Selling Cash 556,05835.380 776,95857 1,214,824