Question

Sendelbach Corporation is a U.S.–based organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto. Although this wholly owned company operates primarily in Canada, it engages in some transactions through a branch in Mexico. Therefore, the subsidiary maintains a ledger denominated in Mexican pesos (Ps) and a general ledger in Canadian dollars (C$). As of December 31, 2015, the subsidiary is preparing financial statements in anticipation of consolidation with the U.S. parent corporation. Both ledgers for the subsidiary are as follows:

Main Operation—Canada
	Debit	Credit
Accounts payable		C$ 39,605
Accumulated depreciation		41,000
Buildings and equipment	C$ 181,000
Cash	40,000
Common stock		64,000
Cost of goods sold	217,000
Depreciation expense	8,300
Dividends, 4/1/15	33,000
Gain on sale of equipment, 6/1/15		6,400
Inventory	93,000
Notes payable—due in 2018		83,000
Receivables	82,000
Retained earnings, 1/1/15		149,590
Salary expense	37,000
Sales		326,000
Utility expense	10,400
Branch operation	7,895
Totals	C$ 709,595	C$ 709,595

Branch Operation—Mexico
	Debit	Credit
Accounts payable		Ps 64,900
Accumulated depreciation		39,900
Building and equipment	Ps 54,000
Cash	66,000
Depreciation expense	3,400
Inventory (beginning—income statement)	37,000
Inventory (ending—income statement)		35,000
Inventory (ending—balance sheet)	35,000
Purchases	71,000
Receivables	35,000
Salary expense	10,400
Sales		138,000
Main office		34,000
Totals	Ps 311,800	Ps 311,800

Additional Information

•	The Canadian subsidiary’s functional currency is the Canadian dollar, and Sendelbach’s reporting currency is the U.S. dollar. The Canadian and Mexican operations are not viewed as separate accounting entities.
•	The building and equipment used in the Mexican operation were acquired in 2005 when the currency exchange rate was C$0.22 = Ps 1.
•	Purchases should be assumed as having been made evenly throughout the fiscal year.
•	Beginning inventory was acquired evenly throughout 2014; ending inventory was acquired evenly throughout 2015.
•	The Main Office account on the Mexican records should be considered an equity account. This balance was remeasured into C$7,895 on December 31, 2015.
•	Currency exchange rates for 1 Ps applicable to the Mexican operation follow:

Weighted average, 2014	C$	0.27
January 1, 2015		0.29
Weighted average rate for 2015		0.31
December 31, 2015		0.32

•	The December 31, 2014, consolidated balance sheet reported a cumulative translation adjustment with a $50,950 credit (positive) balance.
•	The subsidiary’s common stock was issued in 2004 when the exchange rate was $0.43 = C$1.

•	The subsidiary’s December 31, 2014, Retained Earnings balance was C$149,590.00, a figure that has been translated into US$71,043.
•	The applicable currency exchange rates for 1 C$ for translation purposes are as follows:

January 1, 2015	US$	0.70
April 1, 2015		0.69
June 1, 2015		0.68
Weighted average rate for 2015		0.67
December 31, 2015		0.65

a.

Remeasure the Mexican operation’s figures into Canadian dollars. (Hint: Back into the beginning net monetary asset or liability position.) (Input all amounts as positive values.) Canadian Dollars Debit Credit Accounts payable 20,768 Accumulated depreciation 8,778 Building and equipment 11,880 Cash 21,120 Depreciation expense 748 Inventory (beginning—income statement) 9,990 Inventory (ending—income statement) 10,850 Inventory (ending—balance sheet) 10,850 Purchases 22,010 Receivables 11,200 Salary expense 3,224 Sales 42,780 Main office 7,895 Remeasurement loss 49 Total 91,071 91,071 b. Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency and Prepare consolidated financial statement in parent currency (that is U.S. dollars). (Round U.S. Dollar values to 2 decimal places. Amounts to be deducted and losses should be indicated with a minus sign.) SENDELBACH CORPORATION Financial Statements For the Year Ended December 31, 2015 Canadian Dollar U.S. Dollar Income Statement: Sales C$ 368,780 Cost of goods sold Gross profit C$ 368,780 $0.00 Salary expense Utility expense Depreciation expense Gain on sale of equipment Remeasurement loss Net income C$ 368,780 $0.00 Statement of Retained Earnings: Retained earnings, 1/1/15 C$ Net income Dividends Retained earnings, 12/31/15 C$ 0 $0.00 Balance Sheet: Assets: Cash C$ Receivables Inventory Buildings and equipment Accumulated depreciation Total assets C$ 0 $0.00 Liabilities and Equities: Accounts payable C$ Notes payable Common stock Retained earnings Total liabilities and equities C$ 0 $0.00 I figured out part A but need help with part B please! Thank you in advance!!!

Answer 1

Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency and Prepare consolidated financial statement in parent currency (that is U.S. dollars). (Round U.S. Dollar values to 2 decimal places. Amounts to be deducted and losses should be indicated with a minus sign.)
SENDELBACH CORPORATION
Financial Statements
For the Year Ended December 31, 2015
	Canadian Dollar	Exchange Rate	U.S. Dollar
Income Statement:
Sales ($326,000 + 42780)	$368,780.00	0.67	$247,082.60
Cost of goods sold = $217,000 + $9990 + 22010 -$10850	-$238,150.00	0.67	-$159,560.50
Gross profit	$130,630.00	0.67	$87,522.10
Salary expense = 37000 + 3224	-$40,224.00	0.67	-$26,950.08
Utility expense	-$10,400.00	0.67	-$6,968.00
Depreciation expense (8300 + 748)	-$9,048.00	0.67	-$6,062.16
Gain on sale of equipment	$6,400.00	0.68	$4,352.00
Remeasurement loss	-$49.00	0.67	-$32.83
Net income	$77,309.00		$51,861.03
Statement of Retained Earnings:
Retained earnings, 1/1/15	$149,590.00	Given	$71,043.00
Net income	$77,309.00	Above	$51,861.03
Dividends	-$33,000.00	0.69	-$22,770.00
Retained earnings, 12/31/15	$193,899.00		$100,134.03
Balance Sheet:
Assets:
Cash = $40,000 + $21,120	$61,120.00	0.65	$39,728.00
Receivables (11,200 + 82000)	$93,200.00	0.65	$60,580.00
Inventory	$103,850.00	0.65	$67,502.50
Buildings and equipment	$192,880.00	0.65	$125,372.00
Accumulated depreciation	-$49,778.00	0.65	-$32,355.70
Total assets	$401,272.00	0.65	$260,826.80
Liabilities and Equities:
Accounts payable	$60,373.00	0.65	$39,242.45
Notes payable	$83,000.00	0.65	$53,950.00
Common stock	$64,000.00	0.43	$27,520.00
Retained earnings	$193,899.00	0.65	$100,134.03
Cumulative translation adjustment			$39,980.32
Total liabilities and equities	$401,272.00	0.65	$260,826.80