Question: AAA Company provides data processing services for companies operat- ing in the petroleum extraction business. On January 1, Year 1, AAA estab- lished two foreign

AAA Company provides data processing services for companies operat- ing in the petroleum extraction business. On January 1, Year 1, AAA estab- lished two foreign subsidiaries one in Mexico and the other in Venezuela--by investing $100,000 worth of data processing equipment in each. The opening balance sheets for the two subsidiaries in local currency appear as follows: Venezuela Machinery and equipment... Total assets. Contributed capital Total owners' equity.. Mexico (pesos) (bolivars) 1,000,000 150,000,000 1,000,000 150,000,000 1,000,000 150,000,000 1,000,000 150,000,000 The equipment is depreciated on a straight-line basis over a five-year useful life with no residual value. The Year 1 income statement for each subsidiary appears as follows: Revenues... Depreciation expense. Other expenses Net income Mexico Venezuela (pesos) (bolivars) 400,000 60,000,000 (200,000) (30,000,000) (150,000) 50,000 (22,500,000) 7,500,000 Revenues and other expenses occurred evenly throughout the year and were realized in cash by year-end. As a result, the balance sheets for the two com- panies at December 31, Year 1, appear as follows: Cash Machinery and equipment. Less: Accumulated depreciation. Total assets Contributed capital. Retained earnings Total equity. Mexico Venezuela (pesos) (bolivars) 250,000 37,500,000 1,000,000 150,000,000 (200,000) (30,000,000) 1,050,000 157,500,000 1,000,000 150,000,000 50,000 7,500,000 1,050,000 157,500,000 Values for the general price index in Mexico and Venezuela during Year 1 were as follows: January 1.. Average.. December 31. Mexico Venezuela 100 100 105 110 110 120 Required: a. For each subsidiary, restate Year 1 income for changes in the general price index. Include a purchasing power gain or loss. Ignore income taxes. 16) MEXICO (15 points) 17)VENEZUELA (15 points) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!