Question

1

Problem 8

Listed below is financial date from DDD Inc., which is a foreign subsidiary of CCC Inc. DDD Inc. is located in Thailand. DDD Inc's financial statements must be translated into U.S dollars.

Spot rate information is presented below:

Beginning Retained Earnings was 0 Thai Bhat

The current spot rate (12/31/17) is $1= 32 Thai Bhat

The historical spot rate (1/1/17) is   $1= 37 Thai Bhat

The weighted average spot rate is   $1 = 34.87 Thai Bhat

Directions:

Prepare a translated income statement and balance sheet as of December 31, 2017.

                                               DDD Inc.

                                           Income Statement

                                            For the year 2017

***** In Thai Bhat (B)

Revenue	B 15,400,000
COGS	3,600,000
Gross Profit	11,800,000
OtherExpenses	4,475,000
EBIT	7,325,000
Interest Exp	1,084,000
EBT	6,241,000
Tax	1,975,432
Net income	B 4,265,568

                    

2

                                                DDD Inc.

                                              Balance sheet

                                            For the year 2017

***** In Thai Bhat (B)

Assets
Cash	B 40,000,000
Account Receivable	92,000,000
Inventory	3,500,000
Total current assets	135,500,000
Fixed Assets
land	8,450,000
Building	23,500,000
Total assets	B 167,450,000
liabilities and Equity
liabilities
Notes payable	B 45,994,432
Account payable	4,390,000
Salaries payable	8,800.000
Total current liabilities	59,184,432
Bonds payable	78,900,000
Total liabilities	138,084,432
Equity
Common stock	3,100,000
APIC	22,000,000
Retained earnings	4,265,568
Total Equity	29,365,568
Total liabilities and Equity	B 167,450,000

Answer 1

INCOME STATEMENT
	AMOUNT	RATE	CONVERTED AMOUNT
REVENUE	15400000	34.87	536998000
COGS	3600000	34.87	125532000
GROSS PROFIT	11800000		411466000
OTHER EXPENSES	4475000	34.87	156043250
EBIT	7325000		255422750
INTEREST EXP.	1084000	34.87	37799080
EBT	6241000		217623670
TAX	1975432	34.87	68883313.8
NET INCOME	4265568		148740356
NOTE: IN CASE OF CONSOLIDATION OF SUBSIDIARY COMPANY, ALL EXPENSES AND INCOMES SHOULD BE CONVERTED IN LOCAL CURRENCY USING ACTUAL RATE OF TRANSACTION, IN ABSENCE OF THAT RATE, AVERAGE RATE SHOULD BE USED. THEREFORE, WEIGHTED AVERAGE RATE OF $34.87 IS USED ABOVE IN THE SOLUTION.
BALANCE SHEET AS OF DECEMBER 31, 2017
ASSETS	AMOUNT	RATE	CONVERTED AMOUNT
CASH	40000000	32	1280000000
ACCOUNT RECEIVABLE	92000000	32	2944000000
INVENTORY	3500000	32	112000000
TOTAL CURRENT ASSETS	135500000		4336000000
FIXED ASSETS
LAND	8450000	32	270400000
BUILDING	23500000	32	752000000
TOTAL ASSETS	167450000		5358400000
LIABILITIES AND EQUITY
LIABILITIES
NOTES PAYABLE	45994432	32	1471821824
ACCOUNT PAYABLE	4390000	32	140480000
SALARIES PAYABLE	8800000	32	281600000
TOTAL CURRENT LIABILITIES	59184432		1893901824
BOND PAYABLE	78900000	32	2524800000
TOTAL LIABILITIES	138084432		4418701824
EQUITY
COMMON STOCK	3100000	37	114700000
APIC	22000000	37	814000000
RETAINED EARNINGS	4265568	34.87	148740356
TOTAL EQUITY	29365568		1077440356
FOREIGN CURRENCY TRANSLATION RESERVE			-137742180
TOTAL LIABILITIES, EQUITY AND FOREIGN CURRENCY TRANSLATION RESERVE	167450000		5358400000
NOTE: IN CASE OF CONSOLIDATION OF SUBSIDIARY COMPANY, ALL ASSETS AND LIABILITIES SHOULD BE CONVERTED IN LOCAL CURRENCY USING CLOSING RATE ON BALANCE SHEET DATE. THEREFORE, CLOSING RATE ON 12/31/17 I.E. $ 32 IS USED FOR ASSETS AND LIABILITIES. IN CASE OF COMMON STOCK AND APIC, EARLIEST RATE I.E. 1/1/17 $37 IS USED AND IN CASE OF RETAINED EARNINGS, WEIGHTED AVERAGE SPOT RATE I.E. $ 34.87 IS USED, AND DIFFERENCE BETWEEN TOTAL ASSETS AND LIABILITIES IS TRANSFERRED TO FOREIGN CURRENCY TRANSLATION RESERVE.