Cooper Grant is the president of Acme Brush of Brazil the wholly owned Brazilian subsidiary of U.S.-based
Question:
Sales BRL.........10,000
Expenses .........9,500
Pretax income BRL .......500
After translating the Brazilian real income statement into U.S. dollars, the condensed income statement for Acme Brush of Brazil appears as follows (amounts in thousands of U.S. dollars [US$]):
Sales . . . . . . . . . . . . . . . . . . . . . . . . US$3,000
Expenses . . . . . . . . . . . . . . . . . . . . . . .. .3, 300
Pretax income (loss) . . . . . . . . . . . . US$ (300)
Required:
a. Explain how Acme Brush of Brazil’s pretax income (in BRL) became a U.S. dollar pretax loss.
b. Discuss whether Cooper Grant should be paid a bonus or not.
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