Reference no: EM132007307

Question -  Braco Corporation is a subsidiary of Telco Inc. in Mexico. It was established before 1 January 2010.

Braco's balance sheet items as of 31 December 2010, in pesos:

Cash 1,500 Accounts payable 3,000

Accounts rec. 1,500 Long-term debt 5,000

Inventory 2,500 Share Capital 3,000

Fixed assets 8,000 Retained earnings 1,500

Accum. depr. 1,000

Braco's income statement items for 2010, in pesos:

Sales 21,000 Depr. exp 1,000

COGS 15,000 Interest exp. 500

S, G, &A exp. 2,500 Income tax exp. 500

Additional Information:

(i) There was no beginning inventory.

(ii) Inventory that is carried at cost was acquired evenly during the last quarter of 2010.

(iii) Fixed assets were acquired on 1 January 2010.ACC303 Copyright © 2014 SIM University Page 4 of 5 Examination - January Semester 2014

(iv) Purchases were made consistently throughout year.

(v) Share Capital was issued and paid on 1 January 2010.

(vi) Retained Earnings opening balance is 0.

(vii) Dividend paid of 500 pesos at Dec 21, 2010 with exchange of $0.084

(viii) Relevant exchange rates (U.S. dollar per Mexican peso):

January 1, 2010 $0.110

Average rate for 2010 $0.096

Average rate for 4th quarter 2010 $0.091

December 31, 2010 $0.081

Required: Demonstrate the translation of Braco's financial statements into USD in accordance with U.S. GAAP at Dec 31, 2010 using current rate method.