Use current rate method to translate Gramado Company's Year 2 financial statements into dollars. Please fill in the following white blanks labelled with numbers, e.g. (1), (2), .....-, (35). 2. Gramada company was created as a wholly owned subsidiary of Porto Alegre corporation on January 1, Year 1. On that date, Porto Alegre invested $56,000 in Gramados capital stock. Given the exchange rate on that date of $0.70 per cruzeiro, the initial investment of $56,000 was converted into 80,000 cruzeiros (Cz). Other than the capital investment on January 1, there were no transactions involving stockholders' equity in Year 1. Gramado's, cruzeiro-denominated financial statements for Year 2 are as follows: Exchange Rate $ Sales Cost of goods sold Gross profit Operating expenses Income before tax Income taxes Net income Income Statement Year 2 Cz. 600.000 (350,000) 250,000 (120,000) 130,000 (44,200) 85,800 Sales Cost of goods sold Gross profit Operating expenses Income before tax Income taxes Net income Coz 600,000 (1) -350,000 (2) 250,000 -120,000 (3) 130,000 -44,200 (4) 85,800 (7) (8) (9) (10) (11) (12) (13) above Retained earnings, 1/1/92 Net income Dividends Retained earnings, 12/31/42 150,000 (5) 85,800 -20,000 (8) 215,800 (14) (15) (16) (17) Statement of Retained Earnings Year 2 Cz 150,000 85,800 (20,000) 215,800 Retained earnings, 1/1/92 Net income Dividends (paid on 12/1/72) Retained Earnings, 12/31/42 Exchange Rate Cash Receivables Inventory Plant and equipment Less: accumulated depreciation Total assets Balance sheet December 31, Year 2 CZ Cash 80,000 Receivables 75,000 Inventory 78,000 Plant and equipment (net) 260,000 Less: Accumulated Depreciation (70,000) Total assets 423,000 Cz 80,000 (18) 75,000 (19) 78,000 (20) 260,000 (21) -70,000 (22) 423,000 (25) (26) (27) (28) (29) (30) 172,200 (23) 35,000 (24) 215,800 (31) (32) (33) above Liabilities Capital stock Retained earnings, 12/31/42 Total liabilities and stockholder's equity 172,200 35,000 215,800 423.000 Liabilities Capital stock Retained earnings, 12/31/42 Cumulative translation adjustment Total liabilities and stockholders' equity (34) 423,000 (35) The cruzeiro is the primary currency that Gramado uses in its day-to-day operations. The cruzeiro has steadily increased in value against dollar since Porto Alegre made the investment in Gramado on January 1, Year 1. Relevant exchange rates for the cruzeiro for Years 1 and 2 as follows: January 1, Year 1 Average for Year 1 December 31, Year 1 Average for Year 2 December 1, Year 2 December 31, Year 2 $0.70 0.72 0.73 0.75 0.80 0.82 Use current rate method to translate Gramado Company's Year 2 financial statements into dollars. Please fill in the following white blanks labelled with numbers, e.g. (1), (2), .....-, (35). 2. Gramada company was created as a wholly owned subsidiary of Porto Alegre corporation on January 1, Year 1. On that date, Porto Alegre invested $56,000 in Gramados capital stock. Given the exchange rate on that date of $0.70 per cruzeiro, the initial investment of $56,000 was converted into 80,000 cruzeiros (Cz). Other than the capital investment on January 1, there were no transactions involving stockholders' equity in Year 1. Gramado's, cruzeiro-denominated financial statements for Year 2 are as follows: Exchange Rate $ Sales Cost of goods sold Gross profit Operating expenses Income before tax Income taxes Net income Income Statement Year 2 Cz. 600.000 (350,000) 250,000 (120,000) 130,000 (44,200) 85,800 Sales Cost of goods sold Gross profit Operating expenses Income before tax Income taxes Net income Coz 600,000 (1) -350,000 (2) 250,000 -120,000 (3) 130,000 -44,200 (4) 85,800 (7) (8) (9) (10) (11) (12) (13) above Retained earnings, 1/1/92 Net income Dividends Retained earnings, 12/31/42 150,000 (5) 85,800 -20,000 (8) 215,800 (14) (15) (16) (17) Statement of Retained Earnings Year 2 Cz 150,000 85,800 (20,000) 215,800 Retained earnings, 1/1/92 Net income Dividends (paid on 12/1/72) Retained Earnings, 12/31/42 Exchange Rate Cash Receivables Inventory Plant and equipment Less: accumulated depreciation Total assets Balance sheet December 31, Year 2 CZ Cash 80,000 Receivables 75,000 Inventory 78,000 Plant and equipment (net) 260,000 Less: Accumulated Depreciation (70,000) Total assets 423,000 Cz 80,000 (18) 75,000 (19) 78,000 (20) 260,000 (21) -70,000 (22) 423,000 (25) (26) (27) (28) (29) (30) 172,200 (23) 35,000 (24) 215,800 (31) (32) (33) above Liabilities Capital stock Retained earnings, 12/31/42 Total liabilities and stockholder's equity 172,200 35,000 215,800 423.000 Liabilities Capital stock Retained earnings, 12/31/42 Cumulative translation adjustment Total liabilities and stockholders' equity (34) 423,000 (35) The cruzeiro is the primary currency that Gramado uses in its day-to-day operations. The cruzeiro has steadily increased in value against dollar since Porto Alegre made the investment in Gramado on January 1, Year 1. Relevant exchange rates for the cruzeiro for Years 1 and 2 as follows: January 1, Year 1 Average for Year 1 December 31, Year 1 Average for Year 2 December 1, Year 2 December 31, Year 2 $0.70 0.72 0.73 0.75 0.80 0.82