Question

On January 1, 2008, T Systems, a U.S.-based company, purchased a controlling interest in G Company located in Paris, France Direct exchange rates for Euros are: Dollars per Euro January 1, 2008 $.92 December 31, 2008 .87 Average for 2008 .76 Dividend declaration and payment date .80 Required: Translate the year-end balance sheet and income statement of the foreign subsidiary using the current rate method of translation. Euros Translation Income Statement Rate U.S. Dollars Revenue 75,000 Operating expenses (30,000) Net income 45,000 Retained earnings 1/1 10,000 55,000 Dividends (15,000) Retained earnings 12/31 40,000 Balance Sheet Cash and receivables 55,000 Net property, plant, equipment 37,000 Total assets 92,000 Accounts payable 32,000 Common stock 20,000 Retained earnings 40,000 92,000 Cumulative translation adjustment Total liab. & equity 92,000

Answer 1

Answer:

Income Statement	Euros	Translation	U.S Dollars ($)
Revenue	75000	0.76	57000
Operating expenses : Depreciation	(3000)	0.76	(2280)
Operating expenses : Others	(27000)	0.76	(20520)
Foreign currency translation reserve			5270
Foreign currency loss			(1870)
Net Income	45000		37600
Retained earnings 1/1	10000	1/1 - 0.92	9200
	55000
Dividends	(15000)	payment 0.80	(12000)
Retained earnings 12/31	40000		34800
Balance Sheet
Cash Receivables	55000	b/s 0.87	47850
Net PPE	37000	Avg - 0.76	28120
Total assets	92000		75970
Accounts payable	32000	b/s 0.87	27840
Common stock	20000	Avg 0.76	15200
Retained earnings	40000	b/s 0.87	34800
Less:			(1870)
Total liabilities & equities	92000		75970