1 Problem 8 Listed below is financial date from DDD Inc., which is a foreign sub
ID: 2558359 • Letter: 1
Question
1
Problem 8
Listed below is financial date from DDD Inc., which is a foreign subsidiary of CCC Inc. DDD Inc. is located in Thailand. DDD Inc's financial statements must be translated into U.S dollars.
Spot rate information is presented below:
Beginning Retained Earnings was 0 Thai Bhat
The current spot rate (12/31/17) is $1= 32 Thai Bhat
The historical spot rate (1/1/17) is $1= 37 Thai Bhat
The weighted average spot rate is $1 = 34.87 Thai Bhat
Directions:
Prepare a translated income statement and balance sheet as of December 31, 2017.
DDD Inc.
Income Statement
For the year 2017
***** In Thai Bhat (B)
Revenue
B 15,400,000
COGS
3,600,000
Gross Profit
11,800,000
OtherExpenses
4,475,000
EBIT
7,325,000
Interest Exp
1,084,000
EBT
6,241,000
Tax
1,975,432
Net income
B 4,265,568
2
DDD Inc.
Balance sheet
For the year 2017
***** In Thai Bhat (B)
Assets
Cash
B 40,000,000
Account Receivable
92,000,000
Inventory
3,500,000
Total current assets
135,500,000
Fixed Assets
land
8,450,000
Building
23,500,000
Total assets
B 167,450,000
liabilities and Equity
liabilities
Notes payable
B 45,994,432
Account payable
4,390,000
Salaries payable
8,800.000
Total current liabilities
59,184,432
Bonds payable
78,900,000
Total liabilities
138,084,432
Equity
Common stock
3,100,000
APIC
22,000,000
Retained earnings
4,265,568
Total Equity
29,365,568
Total liabilities and Equity
B 167,450,000
Revenue
B 15,400,000
COGS
3,600,000
Gross Profit
11,800,000
OtherExpenses
4,475,000
EBIT
7,325,000
Interest Exp
1,084,000
EBT
6,241,000
Tax
1,975,432
Net income
B 4,265,568
Explanation / Answer
INCOME STATEMENT AMOUNT RATE CONVERTED AMOUNT REVENUE 15400000 34.87 536998000 COGS 3600000 34.87 125532000 GROSS PROFIT 11800000 411466000 OTHER EXPENSES 4475000 34.87 156043250 EBIT 7325000 255422750 INTEREST EXP. 1084000 34.87 37799080 EBT 6241000 217623670 TAX 1975432 34.87 68883313.8 NET INCOME 4265568 148740356 NOTE: IN CASE OF CONSOLIDATION OF SUBSIDIARY COMPANY, ALL EXPENSES AND INCOMES SHOULD BE CONVERTED IN LOCAL CURRENCY USING ACTUAL RATE OF TRANSACTION, IN ABSENCE OF THAT RATE, AVERAGE RATE SHOULD BE USED. THEREFORE, WEIGHTED AVERAGE RATE OF $34.87 IS USED ABOVE IN THE SOLUTION. BALANCE SHEET AS OF DECEMBER 31, 2017 ASSETS AMOUNT RATE CONVERTED AMOUNT CASH 40000000 32 1280000000 ACCOUNT RECEIVABLE 92000000 32 2944000000 INVENTORY 3500000 32 112000000 TOTAL CURRENT ASSETS 135500000 4336000000 FIXED ASSETS LAND 8450000 32 270400000 BUILDING 23500000 32 752000000 TOTAL ASSETS 167450000 5358400000 LIABILITIES AND EQUITY LIABILITIES NOTES PAYABLE 45994432 32 1471821824 ACCOUNT PAYABLE 4390000 32 140480000 SALARIES PAYABLE 8800000 32 281600000 TOTAL CURRENT LIABILITIES 59184432 1893901824 BOND PAYABLE 78900000 32 2524800000 TOTAL LIABILITIES 138084432 4418701824 EQUITY COMMON STOCK 3100000 37 114700000 APIC 22000000 37 814000000 RETAINED EARNINGS 4265568 34.87 148740356 TOTAL EQUITY 29365568 1077440356 FOREIGN CURRENCY TRANSLATION RESERVE -137742180 TOTAL LIABILITIES, EQUITY AND FOREIGN CURRENCY TRANSLATION RESERVE 167450000 5358400000 NOTE: IN CASE OF CONSOLIDATION OF SUBSIDIARY COMPANY, ALL ASSETS AND LIABILITIES SHOULD BE CONVERTED IN LOCAL CURRENCY USING CLOSING RATE ON BALANCE SHEET DATE. THEREFORE, CLOSING RATE ON 12/31/17 I.E. $ 32 IS USED FOR ASSETS AND LIABILITIES. IN CASE OF COMMON STOCK AND APIC, EARLIEST RATE I.E. 1/1/17 $37 IS USED AND IN CASE OF RETAINED EARNINGS, WEIGHTED AVERAGE SPOT RATE I.E. $ 34.87 IS USED, AND DIFFERENCE BETWEEN TOTAL ASSETS AND LIABILITIES IS TRANSFERRED TO FOREIGN CURRENCY TRANSLATION RESERVE.
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