Wallerton Inc is a U S company that has business operations
Wallerton, Inc., is a U.S. company that has business operations in Canada. Wallerton’s Canadian operation exports the majority of its output to customers in the U.S. and sells only a small portion of its output to Canadian customers. The following budgeted income statement for Wallerton separates the revenue and costs that are in Canadian dollars from those in U.S. dollars. Wallerton wants to know the impact of three possible exchange rate scenarios for the Canadian dollar on its budgeted income statement (assume one Canadian dollar is equivalent to either $.72, $.77, or $.82 in U.S. dollars).

a. Complete the chart in the working papers related to Wallerton’s budgeted income statement in U.S. dollars:

b. Explain the impact of a stronger Canadian dollar on budgeted earnings beforetax.
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