Assume that your company owns a subsidiary operating in Great Britain. The subsidiary maintains its books in
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Question:
Assume that your company owns a subsidiary operating in Great Britain. The subsidiary maintains its books in the British pound (GBP) as its functional currency. The subsidiary's financial statements (in GBP) for the most recent year follow in part a. below:
The relevant exchange rates for the $US value of the British pound (GBP) are as follows:
| BOY rate | $1.40 |
| EOY rate | $1.47 |
| Avg. rate | $1.43 |
| PPE purchase date rate | $1.44 |
| LTD borrowing date rate | $1.44 |
| Dividend rate | $1.45 |
| Historical rate (common stock and APIC) | $1.20 |
Instructions for both parts a. and b. below:
- Use a negative sign with your answers to indicate a reduction (expenses, cash outflows, etc.).
- Round answers to the nearest whole number.
a. Translate the subsidiary's income statement, statement of retained earnings, balance sheet, and statement of cash flows into $US (assume that the BOY Retained Earnings is $2,214,450).
b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $1,916,550.
Expert Answer:
A Income Statement In GBP Translation Rate In US Dollars Sales 5400000 143 7722000 Expenses Income A... View the full answer
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