Question

Exceed, a US Company acquired all of the Outstanding Common Stock of Silver company on Jan 1 2019. Silver Company's functional currency is the peso. The exchange rates are as follows:

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

REQUIRED: Translate the 2019 financial statements of the subsidiary to U.S. Dollars from Pesos.

	Peso	Exchange Rate	US $
Income Statement
Net Sales	820,000
Costs & Expenses	(550,000)
Net Income	270,000
Statement of Retained Earnings
Beg. Retained Earnings	100,000
Net Income	270,000
Subtotal	370,000
Div. Declared/paid 12/31/18	(60,000)
Ending, Retained earnings	310,000
Balance Sheet
Assets
Current Assets	700,000
Plant Assets (net)	436,000
Total Assets	1,136,000
Liabilities & Stockholder's Equity
Current Liabilities	308,000
Long-term Debt	90,000
Common Stock	150,000
Additional Paid-In Capital	278,000
Retained Earnings	310,000
Translation Adjustment
Total Liabilities & Stockholder's Equity	1,136,000

Answer 1

Translation is done using Current Rate Method.

All Items on the Income Statement are translated at avg . exchange rate

All Assets & Liabilities are translated at current exchange rate

All items on equity except retained earnings are translated at historical exchange rate

Dividend paid should be translated either at the rate on dividend declaration or at the current rate

Historical exchange rate $.39 Current exchange rate $.32 Avg. exchange rate    $.35