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Remeasurement of financial statements

Assume that your company owns a subsidiary operating in Australia. The subsidiary has adopted the Australian Dollar (AUD) as its functional currency. Your parent company operates this subsidiary like a division or a branch office, making all of its operating decisions, including pricing of its products. You conclude, therefore, that the functional currency of this subsidiary is the $US and that its financial statements must be remeasured prior to consolidation. The subsidiary's financial statements (in AUD) for the most recent year follow in part a. below:

The relevant exchange rates for the $US value of the Australian Dollar (AUD) are as follows:

BOY rate	$0.83
EOY rate	$0.70
Avg. rate	$0.76
Dividend rate	$0.71
Historical rates:
Beginning inventory	$0.83
Land	$0.72
Building	$0.72
Equipment	$0.72
Historical rate (common stock and APIC)	$1.02

For parts a. and b. below, use a negative sign with answers to indicate a reduction.

a. Remeasure the subsidiarys income statement, statement of retained earnings, and balance sheet into $US for the current year (assume that the BOY Retained Earnings is $1,126,899).

Round all answers in "In US Dollars" column to the nearest dollar.

	(in AUD)	Remeasure Rate	In US Dollars
Beginning inventory	$819,500
Purchases	2,143,900
Ending inventory	(983,400)
Cost of goods sold	$1,980,000
Land	$718,960
Building	1,320,000
Accum.deprec.building	(660,000)
Equipment	880,000
Accum.deprec.equipment	(440,000)
Property, plant, and equipment (PPE), net	$1,818,960
Depreciation expensebuilding	$66,000
Depreciation expenseequipment	88,000
Depreciation expense	$154,000
Income statement:
Sales	$3,300,000
Cost of goods sold	(1,980,000)
Gross profit	1,320,000
Operating expenses	(704,000)
Depreciation	(154,000)
Remeasurement gainRemeasurement loss
Net income	$462,000
Statement of retained earnings:
BOY retained earnings	$1,732,500
Net income	462,000
Dividends	(46,200)
Ending retained earnings	$2,148,300
Balance sheet:
Assets
Cash	$939,180
Accounts receivable	765,600
Inventory	983,400
Property, plant, and equipment (PPE), net	1,818,960
Total assets	$4,507,140
Liabilities and stockholders equity
Current liabilities	$559,680
Long-term liabilities	1,304,160
Common stock	220,000
APIC	275,000
Retained earnings	2,148,300
Total liabilities and equity	$4,507,140

b. Compute the remeasurement gain or loss directly assuming BOY net monetary assets of AUD (564,960), a net monetary liability.

Round all answers to the nearest dollar.

Change in net monetary assets:
BOY net monetary assets x (EOY - BOY exchange rates)BOY net monetary assets x BOY exchange rateSales x average exchange ratePurchases x average exchange rateOperating expenses x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net monetary assets x EOY exchange rateChg net monetary assets x (EOY - Avg exchange rate)Remeasurement lossEnding net monetary assets
Chg net monetary assets x (EOY - Avg exchange rate)
BOY net monetary assets x (EOY - BOY exchange rates)BOY net monetary assets x BOY exchange rateSales x average exchange ratePurchases x average exchange rateOperating expenses x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net monetary assets x EOY exchange rateChg net monetary assets x (EOY - Avg exchange rate)Remeasurement lossEnding net monetary assets
BOY net monetary assets x (EOY - BOY exchange rates)BOY net monetary assets x BOY exchange rateSales x average exchange ratePurchases x average exchange rateOperating expenses x average exchange rateDividends x (EOY - Dividend exchange rate)Dividends x dividend exchange rateEOY net monetary assets x EOY exchange rateChg net monetary assets x (EOY - Avg exchange rate)Remeasurement gainRemeasurement lossEnding net monetary assets

Please answer all parts of the question.

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