1. Given the following information, complete the C$ This Yr column and answer the questions below.  Use the current rate method to do the translation. This subsidiary company was set up in the United States (US) last year on December 31^st. You are converting into the parent company's Canadian dollar currency.

Assumptions:

• Year end exchange rate US$ = C$1.30
• Average exchange rate US$ = C$1.25
• Fixed Asset exchange rate US$ = C$1.20
• Retained earnings opening exchange rate US$ = C$1.20
• Historical rate on fixed assets US$ = C$1.20
  1. What is an advantage of the current rate method?

Balance Sheet:    Cash Receivables  Inventory Fixed Assets Debt Capital Stock Retained Earnings, prior Net Income Translation	US$ this YR	Conversion rate   1.30 1.30 1.30 1.30 1.30 1.00	C$ This Yr	C$ Last Yr     - 3000 1000 14000 (9000) (9000) - N/A N/A
Income Statement:   Sales  Costs of Sales Depreciation Other Fixed Costs Taxes Net Income	US$ This YR             3000	Conversion rate   1.25 1.25 1.25 1.25 1.25 1.25	C$ This YR     25000 (12500)  (6250)  (1250)  (1250)	N/A

 

What is necessary for the parent company to apply this method?