Question

Exceed, a US company, on January 1, 2019 acquired all the outstanding common stock of Silver Company, which is located in a country whose currency is the peso. The peso is the functional currency of Silver. For 2019, exchange rates for the peso were as follows:

	Peso 1 =
Jan. 1	$0.39
Dec. 31	$0.32
Average for the year	$0.35

        

Notes: Read carefully and follow strictly so that Bb can grade you correctly!
1. Use comma in numbers, one thousand is 1,000, not 1000. Round to the nearest dollar: 1,000.45 should be 1,000, and 1,000.55 should be 1,001, no decimal points. No $ sign.
2. Use parenthesis ( ) for expenses, accumulated depreciation, dividends, and G/L or adjustments only!

Required: Translate the 2019 financial statements of the subsidiary to U.S. dollars from pesos.

Translation of Financial Statements to U.S. Dollars

For Year Ended December 31, 2019

	Peso	Exchange Rate	U.S. Dollars
Income Statement
Net sales	820,000		Blank 1
Costs and expenses	(550,000)		Blank 2
Net income	270,000		Blank 3
Statement of Retained Earnings
Retained earnings, beginning of year	100,000		Blank 4
Net income	270,000		Blank 5
Subtotal	370,000		Blank 6
Div declared/paid 12/31/2018	(60,000)		Blank 7
Retained earnings, end of year	310,000		Blank 8
Balance Sheet
Assets
Current assets	700,000		Blank 9
Plant assets (net)	436,000		Blank 10
Total assets	1,136,000		Blank 11
Liabilities & Stockholders’ Equity
Current liabilities	308,000		Blank 12
Long-term debt	90,000		Blank 13
Common stock	150,000		Blank 14
Additional paid-in capital	278,000		Blank 15
Retained earnings	310,000		Blank 16
Translation adjustment			Blank 17
Total liabilities & stockholders’ equity	1,136,000		Blank 18

Answer 1

Peso 1 =
Jan. 1	$0.39
Dec. 31	$0.32
Average for the year	$0.35

All the balance sheet items will recorded at their closing exchange rate.

Income statement items are converted @ their Average rate

Opening balance items are converted at the opening rate.

For Year Ended December 31, 2019

	Peso	Exchange Rate	U.S. Dollars
Income Statement
Net sales	820,000	0.35	287,000
Costs and expenses	(550,000)	0.35	(192,500)
Net income	270,000		94,500
Statement of Retained Earnings
Retained earnings, beginning of year	100,000	0.39	39,000
Net income	270,000		94,500
Subtotal	370,000		133,500
Div declared/paid 12/31/2018	(60,000)	0.39	(23,400)
Retained earnings, end of year	310,000		110,100
Balance Sheet
Assets
Current assets	700,000	0.32	224,000
Plant assets (net)	436,000	0.32	139,520
Total assets	1,136,000		363,520
Liabilities & Stockholders’ Equity
Current liabilities	308,000	0.32	98,560
Long-term debt	90,000	0.32	28,800
Common stock	150,000	0.32	48,000
Additional paid-in capital	278,000	0.32	88,960
Retained earnings	310,000		110,100
			374,420
Translation adjustment			(10,900)
Total liabilities & stockholders’ equity	1,136,000		363,520