Question

Assume that our subsidiary reports the following financial statements in Brazilian Real (R$):

	Subsidiary (in R$)
Income statement:
Sales	2,000,000
Cost of goods sold	(1,200,000)
Gross Profit	800,000
Operating expenses	(410,000)
Net income	390,000
Statement of retained earnings:
BOY retained earnings	978,500
Net income	390,000
Dividends	(39,000)
Ending retained earnings	1,329,500
Balance sheet:
Assets
Cash	318,600
Accounts receivable	627,000
Inventory	508,800
PPE, net	1,603,700
Total Assets	3,058,100
Liabilities and Stockholders’ Equity
Current Liabilities	323,400
Long-term Liabilities	635,200
Common Stock	120,000
APIC	650,000
Retained Earnings	1,329,500
Total Liabilities & Equity	3,058,100

Also assume the following exchange rates ($:R$):

BOY Rate	$0.60
EOY rate	$0.90
Avg. rate	$0.80
PPE purchase date rate	$0.70
LTD borrowing date rate	$0.83
Dividend rate	$0.85
Historical rate (Common Stock and APIC)	$0.65

Required:  Translate the subsidiary’s financial statements into $US using the current-rate method, assuming a BOY Retained Earnings balance of $680,900.

Answer 1