Maples Corporation is a Canadian subsidiary of a U.S. parent company. Shown below is the company’s local currency income statement for 20X1. All transactions the company entered into should be considered to have occurred evenly throughout the year, except for the loss on storm damage, which occurred on September 30, 20X1, and resulted in the destruction of certain fixed assets. The U.S. parent translates Maples’ financial statements into U.S. dollars using the current rate method. (in millions of Canadian dollars) Sales C$ 480.7 Cost of goods sold (211.1 ) Loss on storm damage (25.0 ) Selling, general, and administrative expenses (103.0 ) Net income C$ 141.6 Exchange rates between the Canadian dollar and the U.S. dollar (stated as the U.S. dollar value of one Canadian dollar) at various times were as follows: Historical exchange rate when inventory that was sold in 20X1 was purchased 0.85 Historical exchange rate when property that was destroyed in storm was purchased 0.98 Average for 20X1 0.76 December 31, 20X0 0.80 September 30, 20X1 0.74 December 31, 20X1 0.73 Required: What is the amount of net income that would appear in Maples’ 20X1 U.S. dollar income statement after translation under the current rate method? Suppose Maple’s retained earnings at December 31, 20X0, was C$519.1 million. It was US$472.0 million as shown in the company’s U.S. dollar balance sheet on the same date. Maples did not declare or pay any dividends in 20X1. What amount of retained earnings would it report in its December 31, 20X1, U.S. dollar balance sheet?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

3.

Maples Corporation is a Canadian subsidiary of a U.S. parent company. Shown below is the company’s local currency income statement for 20X1. All transactions the company entered into should be considered to have occurred evenly throughout the year, except for the loss on storm damage, which occurred on September 30, 20X1, and resulted in the destruction of certain fixed assets. The U.S. parent translates Maples’ financial statements into U.S. dollars using the current rate method.

 

(in millions of Canadian dollars)  
Sales C$ 480.7  
Cost of goods sold   (211.1 )
Loss on storm damage   (25.0 )
Selling, general, and administrative expenses   (103.0 )
Net income C$ 141.6  
 

 

Exchange rates between the Canadian dollar and the U.S. dollar (stated as the U.S. dollar value of one Canadian dollar) at various times were as follows:

 

       
Historical exchange rate when inventory
that was sold in 20X1 was purchased
  0.85  
Historical exchange rate when property
that was destroyed in storm was purchased
  0.98  
Average for 20X1   0.76  
December 31, 20X0   0.80  
September 30, 20X1   0.74  
December 31, 20X1   0.73  
 

 

Required:

  1. What is the amount of net income that would appear in Maples’ 20X1 U.S. dollar income statement after translation under the current rate method?
  2. Suppose Maple’s retained earnings at December 31, 20X0, was C$519.1 million. It was US$472.0 million as shown in the company’s U.S. dollar balance sheet on the same date. Maples did not declare or pay any dividends in 20X1. What amount of retained earnings would it report in its December 31, 20X1, U.S. dollar balance sheet?

(For all requirements, round your intermediate and final answer to 3 decimal places. Enter your answer in millions and not in whole dollars.)

    Aamounts
1. Net Incom in U.S. dollars  
2.  Retained earnings in US dollars  
 
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Foreign Earned Income
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education