Solo Co. Ltd. located in Mexico City is a wholly owned subsidiary of Partner Inc

Question

Solo Co. Ltd. located in Mexico City is a wholly owned subsidiary of Partner Inc., a U.S. company. At the beginning of the year, Solo's condensed balance sheet was reported in Mexican pesos (MXP) as follows: abilities Stockholders' Equity 3,430,000 14 2,840,000 590,000 Assets During the year, the company earned income of MXP260,000 and on November 1 declared dividends of MXP135,000. The Mexican peso is the functional currency. Relevant exchange rates between the peso and the U.S. dollar follow: January (beginning of year) Average for year November 1 December 31 (end of year) 0.0930 $0.0870 0.0900 0.0915

Explanation / Answer

MXP Rate $ Net assets at the beginning of the year (B) 590000 0.087 51330 ( Assets - Liabilities ) = 3430,000- 2840000 @ .087 $ Adjustments for change in asset position Net income for the year - 260,000 @ average rate as the sales and expenses would be converted at an average rate 260000 0.09 23400 Dividends @ rate on 1st Nov RECORD DATE -135000 0.0915 -12352.5 NET INCOME AFTER DIVIEND (A) 125000 11047.5 Net assets translated at : Rates during the year 590000 0.09 53100 Rates at the end of year © 590000 0.093 54870 Change in other comprehensive income translation adjustment during the year ( net increase) =(A+B-C) 125000 7507.5 Accumulated other comprehensive income translation adjustment, 1/1 ( credit ) 3270 Accumulated other comprehensive income translation adjustment, 31/12 ( credit) 10777.5 B. The dollar weakened during the year as compared to the Mexican peso, as you can get more dollar for 1 mexican peso Notes : 1. All balance sheet items i.e assets and liabilities to be converted at the opening and closing rate 2. Dividend to be converted at the historical date i.e record date i.e 1st Nov 3. Net income to be converted at average rate as the sales and cost of goods sold are also converted at average rate

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.