Question

Please assist with this Problem P7.5

• Consolidating Foreign Currency Financial Statements P7.5 Translation and Ratio Analysis Suppose that on January 1, 2020, La-z-Boy Ine, establish subsidiary in Ireland, La-z-Boy Ireland, to design, manufacture and distribute specialized furnitur European market. Its condensed balance sheet at January 1, 2020, in euros, is below (in thousands Assets Cash Plant assets, net.... Total assets 300,000 €400,000 Liabilities and equity Liabilities........................ Capital stock .. Total liabilities and equity..... €200,000 200,000 €400,000 At December 31, 2020, La-Z-Boy Ireland reported the following condensed trial balance: Dr (Cr) Cash. Merchandise inventory.... Plant assets, net......... Liabilities. Capital stock ... Capital SOOR ........... Sales Cost of sales... Operating expenses...... € 5,000 200,000 250,000 (220,000) (200,000) (500,000) 320,000 145,000 Total .......... No dividends were declared or paid. Relevant exchange rates are as follows: $/€ January 1, 2020 ..... Average for 2020 .......... December 31, 2020 $1.30 1.10 0.90 Required a. Prepare a translated 2020 statement of comprehensive income and balance sheet for La-z-Boy Ire- land as of December 31.2020, assuming the subsidiary's functional currency is the euro Include a schedule calculating the 2020 translation adjustment. b. Assume that operating expenses include e50,000 of depreciation on the original plant assets, the merchandise inventory on hand at December 31 was acquired when the exchange rate was $0.95. and merchandise purchases and cash operating expenses were incurred evenly curred evenly during 2020. Repeat the requirements of part a, assuming the subsidiary s functional currency is the US dollar. Include a schedule calculating the 2020 remeasurement gain or loss for the year c. Compute the ratios of net income sales and net incomc/ayerage total

Answer 1

Statement of mp Translation Statement of comprehendere Income Particulars Exchange Rate Dollars Sales 1 $55000D 101 Cost of sales. ($352000) Operating expenses 10 ($159500) Operating Soume / Net Income $38500 Statement of Retained Earnung Retained eaming, begining $ 0. $ 38500 $38500 Net Income Returned earning, and of the year. Balance sheet Asset Lou(e) Exchangeste Dollars Cash 0.9 oog oog $ 4500 $ 180000 $225000 $ 409500 5000 Inventory 200ooo Plant Alset 250ooo Total &55000 Liabilities Capital shauk 900000 Retained eonnig 35000 habelities 220000 - Accumulated OCI 855000 1.31 0.9 Plug $260000 $38500 $198000 ($87000) $40950

Exchange rate will be same that is rate prevailing at the end of the year for all the items of balance sheet in case of translation except for common stock in which historical rate is used.