Question

Question 8 . On January 1, 2008, T Systems, a U.S.-based company, purchased a controlling interest in G Company located in Paris, France Direct exchange rates for Euros are: Dollars per Euro January 1, 2008 $.92 December 31, 2008 .87 Average for 2008 .76 Dividend declaration and payment date .80 Required: Translate the year-end balance sheet and income statement of the foreign subsidiary using the temporal rate method of translation. Euros Translation Income Statement Rate U.S. Dollars Revenue 75,000 Operating expenses: depreciation (3,000) Operating expenses: other (27,000) Translation loss Net income 45,000 Retained earnings 1/1 10,000 55,000 Dividends (15,000) Retained earnings 12/31 40,000 Balance Sheet Cash and receivables 55,000 Net property, plant, equipment 37,000 Total assets 92,000 Accounts payable 32,000 Common stock 20,000 Retained earnings 40,000 Total liab. & equity 92,000

Answer 1

Income Statement:
	Euros	Translation rate	US dollars
Revenue	75000	0.76	57000
Operating expenses:			0
Depreciation	-3000	0.76	-2280
other	-27000	0.76	-20520
Translation profit/-loss			4250
Net Income	45000		38450
RE 1/1	10000	0.92	9200
Total	55000		47650
Less:Dividend	15000	0.8	12000
RE 12/31	40000		35650
Balance Sheet:
Assets	Euros	Translation rate	US dollars
Cash and receivables	55000	0.87	47850
Net PPE	37000	0.92	34040
Total Assets	92000		81890
Liabilities & SH Eq.	Euros	Translation rate	US dollars
AP	32000	0.87	27840
CS	20000	0.92	18400
RE	40000		35650
Total Liabilities & SH Eq.	92000		81890