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:

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.

Main Operation-Canada Deblt Credit C$ 35,000 Accounts payable Accumulated depreciation Buldings and equipment 27,000 C$ 167,000 26,000 Common stock Cost of goods sold 50,000 203,000 8,000 28,000 Dividends, 4/1/17 Galn on sale of equipment, 6/1/17 98,000 68,000 26,000 5,000 76,000 135,530 312,000 Notes payable-due in 2020 Retalned earnings, 1/1/17 Salary expense Sales Utility expense Branch operation 9,000 7,530 Totals C$ 640,530 C$640,530 Branch Operation-Mexico Credit Accounts payable Accumulated depreclation Bullding and equipment Ps 49,000 19,000 Ps 40,000 59,000 2,000 23,000 Depreciation expense Inventory (beginning-Income statement) Inventory (ending-Income statement) Inventory (ending-balance sheet) Purchases Recelvables Salary expense 28,000 28,000 68,000 21.000 9,000 124,000 30,000 Ps 250,000 Maln office Totals Ps 250,000