On January 2, 200X, Parliament Corporation, a US multinational enterprise, acqui
ID: 2475636 • Letter: O
Question
On January 2, 200X, Parliament Corporation, a US multinational enterprise, acquired all the outstanding common stock of Sirius Company, which is located in a country whose currency is the Euro. The books are kept in Euros and the Euro is the functional currency.
Remeasure and/or translate the 200X Sirius financial statements to the reporting currency (US dollars).
Sirius Company Financial Statements
For the Year Ending December 31, 200X (in EUROs)
Income Statement
Sales
100,000
Cost of Goods Sold
(60,000)
Operating Expenses
(20,000)
Net Income
20,000
Statement of Retained Earnings
Beginning Retained Earnings
70,000
Net Income
20,000
Ending Retained Earnings
90,000
Balance Sheet
Current Assets
130,000
Plant
820,000
Total Assets
950,000
Current Liabilities
60,000
Long Term Debt
340,000
Total Liabilities
400,000
Common Stock
200,000
Paid in Capital
260,000
Retained Earnings
90,000
Total Equity
550,000
Total Liabilities and Equity
950,000
One EURO=
Current rate
$1.40
Average rate
$1.30
Historic rate
$1.20
Sirius Company Financial Statements
For the Year Ending December 31, 200X (in EUROs)
Income Statement
Sales
100,000
Cost of Goods Sold
(60,000)
Operating Expenses
(20,000)
Net Income
20,000
Statement of Retained Earnings
Beginning Retained Earnings
70,000
Net Income
20,000
Ending Retained Earnings
90,000
Balance Sheet
Current Assets
130,000
Plant
820,000
Total Assets
950,000
Current Liabilities
60,000
Long Term Debt
340,000
Total Liabilities
400,000
Common Stock
200,000
Paid in Capital
260,000
Retained Earnings
90,000
Total Equity
550,000
Total Liabilities and Equity
950,000
One EURO=
Current rate
$1.40
Average rate
$1.30
Historic rate
$1.20
Explanation / Answer
Hey Dear Student!!
There are two types of cases
1 Integrated Foreign Operations (IFO)
2 Non Integrated Foreign Operations (NIFO)
In this case information is missing regarding Operations integration so i have solved this question by assuming NIFO. I have also attached the photograph for complete details regarding rates to be used in both cases for your reference.
Sirius Company Financial Statements
Income Statement:-
Sales 100000X1.30= $130000
-COGS 60000 X 1.30= $78000
-Operating Expense
20000X 1.30=. $26000
Net Income=. $26000
Statement of Retained Earnings:-
Beginning Retained Earnings 70000X 1.20=. $84000
Net Income. $26000
Ending Retained Earnings $110000
Balance Sheet:-
Current Assets
130000X1.40=. $182000
Plant 820000X1.40=. $1148000
Total Assets $1330000
Current Liabilities
60000X1.40=. $84000
Long Term Debts
340000X1.40=. $476000
Total Liabilities $560000
Common Stock
200000X1.20=. $240000
Paid in Capital
260000X1.20=. $312000
Retained Earnings $110000
Foreign Currency
Transaction Reserve. $218000
(Difference)
Total Equity $770000
Total Liabilities & $1330000
Equity
Pleasure Teaching You !!
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