Question

Sendelbach Corporation is a U.S.-based organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto. Although this wholly owned company operates primarily in Canada, it engages in some transactions through a branch in Mexico. Therefore, the subsidiary maintains a ledger denominated in Mexican pesos (Ps) and a general ledger in Canadian dollars (C$). As of December 31, 2017, the subsidiary is preparing financial statements in anticipation of consolidation with the U.S. parent corporation. Both ledgers for the subsidiary are as follows:

Main Operation—Canada
	Debit			Credit
Accounts payable				C$	41,555
Accumulated depreciation					42,000
Buildings and equipment	C$	182,000
Cash		41,000
Common stock					65,000
Cost of goods sold		218,000
Depreciation expense		8,400
Dividends, 4/1/17		34,000
Gain on sale of equipment, 6/1/17					6,500
Inventory		94,000
Notes payable—due in 2020					84,000
Receivables		83,000
Retained earnings, 1/1/17					150,590
Salary expense		38,000
Sales					327,000
Utility expense		10,500
Branch operation		7,745
Totals	C$	716,645		C$	716,645

Branch Operation—Mexico
	Debit			Credit
Accounts payable				Ps	67,500
Accumulated depreciation					40,000
Building and equipment	Ps	55,000
Cash		66,500
Depreciation expense		3,500
Inventory (beginning—income statement)		38,000
Inventory (ending—income statement)					35,500
Inventory (ending—balance sheet)		35,500
Purchases		72,000
Receivables		36,000
Salary expense		10,500
Sales					139,000
Main office					35,000
Totals	Ps	317,000		Ps	317,000

Additional Information

The Canadian subsidiary’s functional currency is the Canadian dollar, and Sendelbach’s reporting currency is the U.S. dollar. The Canadian and Mexican operations are not viewed as separate accounting entities.

The building and equipment used in the Mexican operation were acquired in 2007 when the currency exchange rate was C$0.21 = Ps 1.

Purchases of inventory were made evenly throughout the fiscal year.

Beginning inventory was acquired evenly throughout 2016; ending inventory was acquired evenly throughout 2017.

The Main Office account on the Mexican records should be considered an equity account. This balance was remeasured into C$7,745 on December 31, 2017.

Currency exchange rates for 1 Ps applicable to the Mexican operation follow:

Weighted average, 2016	C$	0.26
January 1, 2017		0.28
Weighted average rate for 2017		0.30
December 31, 2017		0.31

The December 31, 2016, consolidated balance sheet reported a cumulative translation adjustment with a $51,950 credit (positive) balance.

The subsidiary’s common stock was issued in 2004 when the exchange rate was $0.44 = C$1.

The subsidiary’s December 31, 2016, retained earnings balance was C$150,590, an amount that has been translated into U.S.$70,363.

The applicable currency exchange rates for 1 C$ for translation purposes are as follows:

January 1, 2017	US$	0.70
April 1, 2017		0.69
June 1, 2017		0.68
Weighted average rate for 2017		0.67
December 31, 2017		0.65

Remeasure the Mexican operation’s account balances into Canadian dollars. (Note: Back into the beginning net monetary asset or liability position.)

Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency, Canadian dollars.

Translate the Canadian dollar functional currency financial statements into U.S. dollars so that Sendelbach can prepare consolidated financial statements.

Complete this question by entering your answers in the tabs below.

Show less

Req A

Remeasure the Mexican operation’s account balances into Canadian dollars. (Note: Back into the beginning net monetary asset or liability position.) (Input all amounts as positive values.)

	Canadian Dollars
	Debit	Credit
Accounts payable
Accumulated depreciation
Building and equipment
Cash
Depreciation expense
Inventory (beginning—income statement)
Inventory (ending—income statement)
Inventory (ending—balance sheet)
Purchases
Receivables
Salary expense
Sales
Main office
Total

b. Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency, Canadian dollars.
c. Translate the Canadian dollar functional currency financial statements into U.S. dollars so that Sendelbach can prepare consolidated financial statements.

(Round U.S. Dollar values to 2 decimal places. Amounts to be deducted and losses should be indicated with a minus sign.)

Show less

SENDELBACH CORPORATION
Financial Statements
For the Year Ended December 31, 2017
	Canadian Dollar		U.S. Dollar
Income Statement:
	C$
	C$
	C$
Statement of Retained Earnings:
Retained earnings, 1/1/15	C$
Retained earnings, 12/31/15	C$
Balance Sheet:
Assets:
	C$
Total	C$
Liabilities and Equities:
	C$
Total	C$