endelbach Corporation is a U.S.-based organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto, Canada. Although this wholly-owned subsidiary 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$). As of December 31, 2024, the subsidiary is preparing financial statements in anticipation of consolidation with the U.S. parent corporation. Both ledgers for the subsidiary are as follows: Main Operation—Canada Debit CreditAccounts payable C$ 21,695Accumulated depreciation 33,000Buildings and equipment C$ 173,000 Cash 32,000 Common stock 56,000Cost of goods sold 209,000 Depreciation expense 7,500 Dividends, 4/1/24 25,000 Gain on sale of equipment, 6/1/24 5,600Inventory 85,000 Notes payable—due in 2027 75,000Receivables 74,000 Retained earnings, 1/1/24 141,590Salary expense 29,000 Sales 318,000Utility expense 9,600 Branch operation 6,785 Totals C$ 650,885 C$ 650,885Branch Operation—Mexico Debit CreditAccounts payable Ps 53,100Accumulated depreciation 20,100Building and equipment Ps 46,000 Cash 62,000 Depreciation expense 2,600 Inventory (beginning—income statement) 29,000 Inventory (ending—income statement) 31,000Inventory (ending—balance sheet) 31,000 Purchases 63,000 Receivables 27,000 Salary expense 9,600 Sales 130,000Main office 36,000Totals Ps 270,200 Ps 270,200Additional InformationThe 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 2014 when the currency exchange rate was C$0.19 = Ps 1. Purchases of inventory were made evenly throughout the fiscal year. Beginning inventory was acquired evenly throughout 2023; ending inventory was acquired evenly throughout 2024. The Main Office account on the Mexican records should be considered an equity account. This balance was remeasured into C$6,785 on December 31, 2024. Currency exchange rates for 1 Ps applicable to the Mexican operation follow: Weighted average rate for 2023 C$ 0.24January 1, 2024 0.26Weighted average rate for 2024 0.28December 31, 2024 0.29The December 31, 2023, consolidated balance sheet reported a cumulative translation adjustment with a $42,950 credit (positive) balance. The subsidiary’s common stock was issued in 2011 when the exchange rate was $0.51 = C$1. The subsidiary’s December 31, 2023, retained earnings balance was C$141,590, an amount that has been translated into US$66,803. The applicable currency exchange rates for 1 C$ for translation purposes are as follows: January 1, 2024 US$ 0.70April 1, 2024 0.69June 1, 2024 0.68Weighted average rate for 2024 0.67December 31, 2024 0.65Required: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.
endelbach Corporation is a U.S.-based organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto, Canada. Although this wholly-owned subsidiary 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$). As of December 31, 2024, the subsidiary is preparing financial statements in anticipation of consolidation with the U.S. parent corporation. Both ledgers for the subsidiary are as follows:
Main Operation—Canada
Debit Credit
Accounts payable C$ 21,695
Accumulated depreciation 33,000
Buildings and equipment C$ 173,000
Cash 32,000
Common stock 56,000
Cost of goods sold 209,000
Depreciation expense 7,500
Dividends, 4/1/24 25,000
Gain on sale of equipment, 6/1/24 5,600
Inventory 85,000
Notes payable—due in 2027 75,000
Receivables 74,000
Retained earnings, 1/1/24 141,590
Salary expense 29,000
Sales 318,000
Utility expense 9,600
Branch operation 6,785
Totals C$ 650,885 C$ 650,885
Branch Operation—Mexico
Debit Credit
Accounts payable Ps 53,100
Accumulated depreciation 20,100
Building and equipment Ps 46,000
Cash 62,000
Depreciation expense 2,600
Inventory (beginning—income statement) 29,000
Inventory (ending—income statement) 31,000
Inventory (ending—balance sheet) 31,000
Purchases 63,000
Receivables 27,000
Salary expense 9,600
Sales 130,000
Main office 36,000
Totals Ps 270,200 Ps 270,200
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 2014 when the currency exchange rate was C$0.19 = Ps 1.
Purchases of inventory were made evenly throughout the fiscal year.
Beginning inventory was acquired evenly throughout 2023; ending inventory was acquired evenly throughout 2024.
The Main Office account on the Mexican records should be considered an equity account. This balance was remeasured into C$6,785 on December 31, 2024.
Currency exchange rates for 1 Ps applicable to the Mexican operation follow:
Weighted average rate for 2023 C$ 0.24
January 1, 2024 0.26
Weighted average rate for 2024 0.28
December 31, 2024 0.29
The December 31, 2023, consolidated balance sheet reported a cumulative translation adjustment with a $42,950 credit (positive) balance.
The subsidiary’s common stock was issued in 2011 when the exchange rate was $0.51 = C$1.
The subsidiary’s December 31, 2023, retained earnings balance was C$141,590, an amount that has been translated into US$66,803.
The applicable currency exchange rates for 1 C$ for translation purposes are as follows:
January 1, 2024 US$ 0.70
April 1, 2024 0.69
June 1, 2024 0.68
Weighted average rate for 2024 0.67
December 31, 2024 0.65
Required:
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.
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