due in 3 hours 494596

University of Maryland University College Final Examination Acct425: International Accounting Question 1: Suggested time 40 minutes: 20% points: Corcovado Company was created as a wholly owned subsidiary of Campinhas Corporation on January 1, 2012. On that date Campinhas invested $42,000 in Corcovado’s capital stock. Given the exchange rate on that date of $0.84 per cruzeiro, the initial investment of $42,000 was converted into 50,000 cruzeiros (Cz). Other than the capital investment in January 1, there were no transactions involving stockholder’s equity for 2012. Corcovado’s Cz denominated financial statements for December 31, 2013 are as follows: Income Statement For the year ended December 31, 2013 (in Cz) Sales 540,000 COGS 310,000 Gross Profit 230,000 Operating expenses 108,000 Income before tax 122,000 Income taxes 40,000 Net Income 82,000 Statement of Retained Earnings December 31, 2013 (in Cz) Retained earnings, January 1, 2013 154,000 Net Income 82,000 Dividends paid, December 1, 2013 20,000 Retained earnings, December 31, 2013 216,000 Balance Sheet December 31, 2013 (in Cz) Cash 50,000 Receivables 100,000 Inventory 72,000 Plant and equipment, net 300,000 Accumulated Depreciation 70,000 TOTAL ASSETS 452,000 Liabilities 186,000 Capital stock 50,000 Retained earnings, December 31, 2013 216,000 TOTAL LIABILITIES AND EQUITY 452,000 The Cz is the primary currency that Corcovado uses in its day to day operations. The Cz has steadily fallen in value against the USD since Campinhas made the investment Corcovado on January 1, 2012. Relevant exchange rates for 2012 and 2013 are as follows: January 1, 2012 $0.84 Average for 2012 (year) $0.80 December 31, 2012 $0.75 Average for 2013 (year) $0.72 December 1, 2013 $0.71 December 31, 2013 $0.70 Instructions Translate Corcovado’s Year 2013 financial statements into dollars. Compute the translation adjustments for Year 2012 and Year 2013 and reconcile these…