Question

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:

	(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
AnswerCumulative translation adjustmentEffect of exchange rate on cash			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
AnswerCumulative translation adjustmentEffect of exchange rate on cash			Answer
Beginning cash	275,400	Answer	Answer
Ending cash	$384,210	Answer	$Answer

Answer 1

Income Statement:	In CADs	Translation	In
		Rate	US Dollars
Sales	1,350,000	0.73	985500
Cost of goods sold	-810,000	0.73	-591300
Gross profit	540,000		394200
Operating expenses	-351,000	0.73	-256230
Net income	189,000		137970
Statement of Retained Earnings:
BOY ret. earnings	708,750		553612
Net income	189,000		137970
Dividends	-18,900	0.75	-14175
EOY ret. earnings	878,850		677407
Balance Sheet:
Assets
Cash	$384,210	0.76	$291,999.60
Accounts receivable	313,200	0.76	$238,032.00
Inventory	402,300	0.76	$305,748.00
Property, plant, and equipment (PPE), net	744,120	0.74	$550,648.80
Total assets	$1,843,830		$1,386,428.40
Liabilities and stockholders' equity
Current liabilities	$228,960	0.76	$174,009.60
L-T liabilities	533,520	0.74	$394,804.80
Common stock	90,000	0.6	$54,000.00
APIC	112,500	0.6	$67,500.00
Ret. earnings	878,850		677407
AnswerCumulative translation adjustmentEffect of exchange rate on cash			18707
Total liabilities and equity	$1,843,830		$1,386,428.40
Statement of Cash Flows:
Net income	$189,000	0.73	$137,970
Change in accounts receivable	-52,200	0.73	($38,106)
Change in inventories	-67,050	0.73	($48,947)
Change in current liabilities	38,160	0.73	$27,857
Net cash from operating activities	107,910		$78,774
Change in PPE, net	-69,120	0.74	($51,149)
Net cash from investing activities	-69,120		($51,149)
Change in long-term debt	88,920	0.74	$65,801
Dividends	-18,900	0.75	($14,175)
Net cash from financing activities	70,020		$51,626
Net change in cash	108,810		$79,251
AnswerCumulative translation adjustmentEffect of exchange rate on cash			18707
Beginning cash	275,400	0.7	192780
Ending cash	$384,210	0.76	291999.6