Sendelbach Corporation is a U.S.-based organization with operations throughout the world. One of its subsidiaries is headquartered

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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, 2017, the subsidiary is preparing financial statements in anticipation of consolidation with the U.S. parent corporation. Both ledgers for the subsidiary are as follows:


Sendelbach Corporation is a U.S.-based organization with operations throughout the

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 2007 when the currency exchange rate was C$0.25 = Ps 1. ∙ Purchases of inventory were made evenly throughout the fiscal year. ∙ Beginning inventory was acquired evenly throughout 2016; ending inventory was acquired evenly throughout 2017. ∙ The Main Office account on the Mexican records should be considered an equity account. This balance was remeasured into C$7,530 on December 31, 2017. ∙ Currency exchange rates for 1 Ps applicable to the Mexican operation follow:

 

Weighted average, 2016 . . . . . . . . . . . . . . . . . C$0.30
January 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . ..0.32
Weighted average rate for 2017 . . . . . . . . . . …..0.34
December 31, 2017 . . . . . . . . . . . . . . . . . . . . . …0.35


∙ The December 31, 2016, consolidated balance sheet reported a cumulative translation adjustment with a $36,950 credit (positive) balance. ∙ The subsidiary’s common stock was issued in 2004 when the exchange rate was $0.45 = C$1. ∙ The subsidiary’s December 31, 2016, retained earnings balance was C$135,530, an amount that has been translated into U.S.$70,421. ∙ The applicable currency exchange rates for 1 C$ for translation purposes are as follows:

 

January 1, 2017. . . . . . . . . . . . . . . . . . . . .U.S.$0.70
April 1, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . 0.69
June 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.68
Weighted average rate for 2017 . . . . . . . . . . …0.67
December 31, 2017. . . . . . . . . . . . . . . . . . . . . ..0.65


a. Remeasure the Mexican operation’s account balances into Canadian dollars. 

b. Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency, Canadian dollars. 

c. Translate the Canadian dollar functional currency financial statements into U.S. dollars so that Sendelbach can prepare consolidated financial statements.


Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
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Advanced Accounting

ISBN: 978-1259444951

13th edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni

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