Reference no: EM132967056

BC Inc. has a single wholly-owned American subsidiary called US1 based in Los Angeles, California, which was acquired January 1, 2017. US1 submitted its financial statements for 2017 to ABC. Selected exchange rates in effect throughout 2017 are shown below:

US1 financial results for 2017 were as follows:

January 1 2017 US $1 = CDN 0.815
December 31 2017 US $1 = CDN0.8175
Average for 2017 US $1 = CDN 0.825
Date of Purchase of Inventory on hand US $1 =CDN 0.83
Date dividends were declared US $1 = CDN 0.8125

US1 financial results for 2017 were as follows:
US1 Financial Statements at December 31, 2017

(in U.S. dollars)

Income statment

Sales 5000000
cost of goods sold 3500000
Depreciation expense 150000
bond interest expense 100000
other expense 750000
net income 500000

Statement of retain earnings

January 1, 2017 400000
net income 500000
dividends -100000
December 31 2017 800000

Balance sheet
Cash 1200000
Accounts Receivable 1900000
Inventory 700000 (500000 January 1, 2017)
Plant and equipment net 400000
4200000
Current Liabilities 400000
Bond Payable 2000000
Common shares 1000000
Retain earnings 800000
4200000

US1 is considered to be a self-sustaining subsidiary (i.e., the functional currency of the foreign operation is different than the parent).

Problem a. Translate the value of retained earnings at the beginning of the year.

Problem b. Translate the value of Dividends paid at the end of the year.

Now assuming US1 is an integrated foreign operation, answer the following questions:

Problem c. Translate the value of sales for the year.

Problem d. If there were no capital asset additions or disposals in 2017, calculate the depreciation expense for the year.

Problem e. If the bonds were outstanding throughout the year, translate the company's bond interest expense for the year?