Assets

Cash
CRC
Accounts rece CRC
Land
CRC
Buildings
CRC
Accumulated dCRC
Buildings,net CRC

50,000
20,000
100,000
500,000
(10,000)
490,000

Total Assets CRC

660,000

Nicaragua Subsidiary
Profit and Loss Statement and
Accounts of Retained Earnings Statement
As of December 31st 2004
Sales income

Operational
expense,including C$10
depreciation
Net profit
Retained earnings as of 1/1/2
Declared dividends
Retained earnings as of 12/31

200
Nicaraguan
Balance
As of Decem
(Cordo
Assets
Cash
Accounts receivable
Land
Buildings
Accumulated depreciation
Buildings,net
Total Assets

Relevant exchange rates include:

C$1=
C$1=
C$1=

C$1=

Nicaraguan Subsidiary
Balance Sheet
As of December 31st. 2004
Equity and liabilities
Accounts payable
Rent paid in advance
Mortgage payable

CRC
CRC
CRC

30,000
10,000
400,000

Common shares
Paid-in capital over and above par value
Retained earnings
Total equity and liabilities

CRC
CRC
CRC
CRC

40,000
160,000
20,000
660,000

Nicaragua Subsidiary
Profit and Loss Statement and
ccounts of Retained Earnings Statement
As of December 31st 2004
(Cordobas)
CRC
CRC
CRC

CRC
CRC

200,000
170,000
30,000
-(10)
20

2005
Nicaraguan Subsidiary
Balance Sheet
As of December 31,2005
(Cordobas)
CRC
CRC
CRC
CRC
CRC
CRC
CRC

Equity and liabilities

100,000 Accounts payable
- Rent paid in advance
150,000 Mortgage payable
500,000
(20,000) Common shares
480,000 Paid-in capital over and
Retained earnings
730,000 Total equity and liabili

Nicaragua Subsidiary
Profit and Loss Statement and
Accounts of Retained Earnings Statement
As of December 31st 2005
(Cordobas)
Sales income
CRC

Operational expense,including C$10

depreciation

220,000

Net profit

CRC
CRC

170,000
50,000

Retained earnings as of 1/1/2005

Declared dividends
Retained earnings as of 12/31/2005

CRC
CRC
CRC

20,000
(40,000)
30,000

e rates include:
0.45 in early 2005
0.48 weighted average for 2005
$0.50 by late 2005
$0.49 when dividends were declared in 2005 and additional
land was purchased, backed by a new mortage

CRC
CRC
CRC

50,000
450,000

CRC
CRC
CRC
CRC

40,000
160,000
30,000
730,000

Assets
Cash
Accounts receivable
Land
Buildings
Accumulated depreciation
Buildings,net
Total Assets

Nicaragua Subsidiary
Profit and Loss Statement and
Accounts of Retained Earnings Statement
As of December 31st 2004
Sales income
Operational expense,including C$10 depreciation(c
depre
Net profit
Retained earnings as of 1/1/2004
Declared dividends
Retained earnings as of 12/31/2004
C$1=
C$1=
C$1=

C$1=

A
Assets
Cash
Accounts receivable
Land
Buildings
Accumulated depreciation
Buildings,net
Total Assets

Nicaragua Subsidiary
Profit and Loss Statement and
Accounts of Retained Earnings Statement
As of December 31st 2005
(Cordobas)
Sales income

Operational expense,including C$10

depreciation
Depreciation(current)
Net profit
Retained earnings as of 1/1/2005
Declared dividends
Retained earnings as of 12/31/2005

CRC
CRC
CRC
CRC
CRC
CRC

50,000
20,000
100,000
500,000
(10,000)
490,000

CRC

660,000 $

(Cordobas)
CRC
CRC
CRC
CRC
-CRC
CRC
$
$
$

200,000
17,000
10,000
30,000

$
$
$
$
$
$

$
$
$
$
$
--(10,000) $
20,000 $

22,500.00
9,000.00
45,000.00
225,000.00
(4,500.00)
220,500.00
297,000.00

86,000.00
7,310.00
4,500.00
74,190.00
(4,200.00)
8,400.00

0.40 in early 2004(when common shares were issued and th

0.43 Weighted average for 2004
0.42 at the time dividends were declared and the advanced

0.45

2005
Nicaraguan Subsidiary
Balance Sheet
As of December 31,2005
(Cordobas)
CRC
CRC
CRC
CRC
CRC
CRC
CRC

100,000
150,000
500,000
(20,000)
480,000

$
$
$
$
$
$
$
730,000 $

50,000.00
75,000.00
250,000.00
(10,000.00)
240,000.00
605,000.00

ua Subsidiary
ss Statement and
ned Earnings Statement
mber 31st 2005
ordobas)
CRC

220,000

CRC

105,600

CRC

160,000

CRC

80,000

CRC
CRC

10,000
50,000

CRC

24,500

CRC
CRC
CRC

20,000
(40,000)
30,000

Nicaraguan Subsidiary
Balance Sheet
As of December 31st. 2004
Equity and liabilities
Accounts payable
Rent paid in advance
Mortgage payable

CRC
CRC
CRC

30,000
10,000
400,000

Common shares
CRC
Paid-in capital over and above par va CRC
Retained earnings
CRC
Total equity and liabilities
CRC

40,000
160,000
20,000
660,000

Rate

Net income in FC
0.43 Declared dividends
0.43 Retained earnings
0.43
0.43

$
$
$
$
$
$
$
$

13,500.00
4,500.00
180,000.00
16,000.00
64,000.00
8,600.00
286,600.00

10,400.00

$
$
$

74,190.00
(4,200.00)
69,990.00

78,390.00

n shares were issued and the land and building were purchased, backed with a mortgage.

declared and the advanced rent payment was received.

by late 2004

Equity and liabilities

Accounts payable
Rent paid in advance
Mortgage payable

CRC
CRC
CRC

50,000
450,000

Common shares
CRC
Paid-in capital over and above par va CRC
Retained earnings
CRC
Total equity and liabilities
CRC

40,000
160,000
30,000
730,000

$
$
$

25,000.00
225,000.00
16000
64000

Relevant exchange rates inclu

C$1=
C$1=
C$1(current)=

C$1=

Net income in FC
Declared dividends
Retained earnings

$
$
$

24,500.00
(19,200.00)
5,300.00

a mortgage.

nt exchange rates include:

0.45 in early 2005
0.48 weighted average for 2005
$0.50 by late 2005
$0.49 when dividends were declared in
2005 and additional land was purchased,
backed by a new mortage

0.45
0.48
0.5
0.49

a.

Salvadorian HQ
Part of the balance sheet
Common shares
Paid-in capital over and above par value

Investment
Cash
At the end of the year
Investment
Equity in investee
Cash
Investement

The final journal is the exchange rate

Investment

unrealized Gain on exchange difference

We assume now that the salvadorean company decides to sell the Subsidiary Company for $

Unrealized Gain Exhange

Cash
Investment
Gain on Sale

CRC
CRC

40,000
160,000

0.40 $16,000.00
0.40 $64,000.00

80,000.00
$ 80,000.00

12,900.00
$ 12,900.00

4,200.00
$

10,300.00

4,200.00

It should be 80,000 our investm

$ 10,300.00

to sell the Subsidiary Company for $120,000

$
$

(year 2004)

10,300.00
120,000.00
$ 99,000.00
$ 31,300.00

We realized the gainings for the Foreign exc

hould be 80,000 our investment

It goes into "Other Comprehensive Income" is an income statement

Investment
80000
12900
10300
99000

ainings for the Foreign exchange and the sale.

4200

99000

Session No. 14
Methods translate financial Statements
*current

*Monetary-temproal

Functional Currency is the Cordova (prices and expenses are most in Cordova)

So, we want to translate this cordovas to US dollars we have to use the Current rate method.

Assets
Cash
Accounts receivable
Land
Buildings
Accumulated depreciation
Buildings,net

Total Assets

C$1=
C$1=

C$1=
C$1= current

We used the average

We have the information

We have the information historical

We have the information historical

historical
historical
when dividends were paid

We used the average

We have the information

We have the information historical

We have the information historical

historical
historical
when dividends were paid

Balance 2015

average

We used the average

We have the information

We have the information historical

We have the information historical

historical
historical
when dividends were paid

average

We used the average

We have the information

We have the information historical

We have the information historical

historical
historical
when dividends were paid

We do now the journal entries.

Dec 31/2005
Cash

Investment
Investment
Income from Investment
Investment
Unrealized Gain on Exchange Difference

local operations

inflation>100%

(prices and expenses are most in Cordova)

as to US dollars we have to use the Current rate method.

Rate
CRC
CRC
CRC
CRC
CRC
CRC

50,000
20,000
100,000
500,000
(10,000)
490,000

CRC

660,000

$
$

0.45
0.45
0.45
0.45
0.45
0.45

0.40 in early 2004(when common shares w

0.43 Weighted average for 2004

$
$

0.42 at the time dividends were declared a

0.45

Cordobas
Operating Activities
net income
Adjustments to net income
Depreciation
Increase in Accounts Receivable
Increase in Accounts Payable
Increase in unearned rent
Net cash provided by operating activities

CRC

30,000

CRC
CRC
CRC
CRC
CRC

10,000
(20,000)
30,000
10,000
60,000

Investing Activities
purchase of land
purchase of builiding
net cash provide provided by investing activities

CRC
CRC
CRC

(100,000)
(500,000)
(600,000)

CRC
CRC
CRC
CRC

200,000
400,000
(10,000)
590,000

CRC

50,000

Financing Activities
Ordinary Shares issue
Mortgage Payable
Dividends Paid
Net cash provided by financing activities
effect on exchange rate on cash
Increase in cash

Cordobas
Operating Activities
net income
Adjustments to net income
Depreciation
Increase in Accounts Receivable
Increase in Accounts Payable

CRC

30,000

CRC
CRC
CRC

10,000
(20,000)
30,000

Increase in unearned rent

Net cash provided by operating activities

CRC
CRC

Investing Activities
purchase of land
purchase of builiding
net cash provide provided by investing activities

CRC
CRC
CRC

(100,000)
(500,000)
(600,000)

CRC
CRC
CRC
CRC

200,000
400,000
(10,000)
590,000

CRC

50,000

Financing Activities
Ordinary Shares issue
Mortgage Payable
Dividends Paid
Net cash provided by financing activities
effect on exchange rate on cash
Increase in cash

10,000
60,000

2005
Nicaraguan Subsid
Balance Sheet
As of December 31
(Cordobas)
Assets
Cash
Accounts receivable
Land
Buildings
Accumulated depreciation
Buildings,net

CRC
CRC
CRC
CRC
CRC
CRC

100,000
150,000
500,000
(20,000)
480,000

Total Assets

Sales income
Operational Expenses including depre
Net profit

CRC

730,000

Income Statement
Cordobas
CRC
220,000
CRC
170,000
CRC
50,000

Retained earnings as 1/1/2005

CRC

20,000

Declared dividends

CRC

(40,000)

Retained earnings as of 12.31/2005

CRC

30,000

Cordobas
Operating Activities
net income
Adjustments to net income
Depreciation
Increase in Accounts Receivable
Increase in Accounts Payable
Increase in unearned rent
Net cash provided by operating activities
Investing Activities
purchase of land
purchase of builiding
net cash provide provided by investing activities
Financing Activities
Ordinary Shares issue
Mortgage Payable
Dividends Paid
Net cash provided by financing activities
effect on exchange rate on cash
Increase in cash

CRC

50,000

CRC
CRC
CRC
CRC
CRC

10,000
20,000
20,000
(10,000)
90,000

CRC

(50,000)
-

CRC

(50,000)

CRC
CRC
CRC

50,000
(40,000)
10,000

CRC

50,000

Initial Cash
Cash at the end of the period

CRC
CRC

50,000
100,000

As you can see "No cuadra" We make the adjustment what we have in the balance sheet.

Cordobas
Operating Activities
net income
Adjustments to net income
Depreciation
Increase in Accounts Receivable
Increase in Accounts Payable
Increase in unearned rent
Net cash provided by operating activities
Investing Activities
purchase of land
purchase of builiding
net cash provide provided by investing activities
Financing Activities
Ordinary Shares issue
Mortgage Payable
Dividends Paid
Net cash provided by financing activities
effect on exchange rate on cash
Increase in cash
Initial Cash
Cash at the end of the period

ntries.
19600

CRC

50,000

CRC
CRC
CRC
CRC
CRC

10,000
20,000
20,000
(10,000)
90,000

CRC

(50,000)
-

CRC

(50,000)

CRC
CRC
CRC

50,000
(40,000)
10,000

CRC
CRC
CRC

50,000
50,000
100,000

19600
24000
24000
11600
11600

$
$
$
$
$
$

Nicaraguan Subsidiary
Balance Sheet
As of December 31st. 2004
Equity and liabilities
22,500.00 Accounts payable
9,000.00 Rent paid in advance
45,000.00 Mortgage payable
225,000.00
(4,500.00) Common shares
220,500.00 Paid-in capital over and above par
Retained earnings
Cumulative Exhange Difference
297,000.00 Total equity and liabilities

when common shares were issued and the land and building were purchased, backed with a mortgage.
age for 2004

idends were declared and the advanced rent payment was received.
by late 2004

Rate

Cash Flow Statement

US Dollars
0.43 $
$
0.43 $
0.43 $
0.43 $
0.42 $
$

12,900.00
4,300.00
(8,600.00)
12,900.00
4,200.00
25,700.00

0.4 $
0.4 $
$

(40,000.00)
(200,000.00)
(240,000.00)

0.4 $
0.4 $
0.42 $
$

80,000.00
160,000.00
(4,200.00)
235,800.00

Rate

21,500.00

Cash Flow Statement

US Dollars
0.43 $
$
0.43 $
0.43 $
0.43 $

12,900.00
4,300.00
(8,600.00)
12,900.00

0.42 $
$

4,200.00
25,700.00

0.4 $
0.4 $
$

(40,000.00)
(200,000.00)
(240,000.00)

0.4 $
0.4 $
0.42 $
$
$
$

80,000.00
160,000.00
(4,200.00)
235,800.00
1,000.00
22,500.00

2005
Nicaraguan Subsidiary
Balance Sheet
As of December 31,2005
(Cordobas)
Rate
0.5
0.5
0.5
0.5
0.5
0.5

$
$
$
$
$
$

50,000.00
75,000.00
250,000.00
(10,000.00)
240,000.00

365,000.00

atement
Rate

USDollars
0.48
0.48

105,600$
81,600$
24,000$
-$
8,700$

0.49

19,600$13,100$

Rate

Cash Flow Statement

US Dollars
0.48 $
$
0.48 $
0.48 $
0.48 $
0.48 $
$

24,000.00
4,800.00
9,600.00
9,600.00
(4,800.00)
43,200.00

0.49 $

(24,500.00)

(24,500.00)

0.49 $
0.49 $
$

24,500.00
(19,600.00)
4,900.00

23,600.00

22500
46,100.00

n the balance sheet.

Rate

Cash Flow Statement

US Dollars
0.48 $
$
0.48 $
0.48 $
0.48 $
0.48 $
$

24,000.00
4,800.00
9,600.00
9,600.00
(4,800.00)
43,200.00

0.49 $

(24,500.00)

(24,500.00)

0.49 $
0.49 $
$
$
$

24,500.00
(19,600.00)
4,900.00
3,900.00
23,600.00
22500
50,000.00

This is the difference

Cumulative Exchange Difference

CRC
CRC
CRC

30,000
10,000
400,000

CRC
CRC
CRC

40,000
160,000
20,000

CRC

660,000

g were purchased, backed with a mortgage.

received.

We have a difference compare with the balance So we present an effect on exhange

The same as the balance

Equity and liabilities

Accounts payable
Rent paid in advance
Mortgage payable

Rate

Common shares
Paid-in capital over and above pa
Retained earnings

0.5
0.5
0.5
0.4
0.4

Cumulative Exchange Difference

Total equity and liabilities

ive Exchange Difference

10300
11600
21900

Rate
0.45 $
0.45 $
0.45 $
$
0.40 $
0.40 $
$
$
$

13,500.00
4,500.00
180,000.00
16,000.00
64,000.00
8,700.00
10,300.00
286,700.00

resent an effect on exhange

297000-286700
$
10,300.00

CRC
CRC
CRC

50,000
450,000

$25,000
$0
$225,000

CRC
CRC
CRC

40,000
160,000
30,000

$16,000
$64,000
13,100$

CRC

730,000

21,900$
$365,000

In the Current rate Method

Balance Sheet
Liabilities
Income statement
Equity we use historical rate

Sales income
Operational Expenses
Net profit

current rate
current rate
average rate
historical rate

Income Statement
Cordobas
Rate
200000
170000
30000

Retained earnings as 1/1/2004

Declared dividends
Retained earnings as of 12.31/2014

0.43
0.43

-10000
20000

0.42

USDollars
86000
73100
12900
0
-4200
8700

Assets
Cash
Accounts receivable
Land
Buildings
Accumulated depreciation
Buildings,net

CRC
CRC
CRC
CRC
CRC
CRC

50,000
20,000
100,000
500,000
(10,000)
490,000

Total Assets

CRC

660,000

Nicaragua Subsidiar
Profit and Loss Statement
Accounts of Retained Earnings
As of December 31st 20
Sales income

Operational expense,including C$10

depreciation
Net profit
Retained earnings as of 1/1/2004
Declared dividends
Retained earnings as of 12/31/2004

Relevant exchange rates include:

C$1=
C$1=

C$1=
C$1=

Sales income
Operational Expenses
Net profit
Retained earnings as 1/1/2004
Declared dividends
Retained earnings as of 12.31/2014

Relevant exchange rates include:

C$1=
C$1=
C$1(current)=
C$1=

Rate
0.45
0.45
0.45
0.45
0.45
0.45

Nicaragua Subsidiary
Profit and Loss Statement and
ccounts of Retained Earnings Statement
As of December 31st 2004
(Cordobas)
CRC

200,000

CRC
CRC

170,000
30,000

CRC
CRC

-(10,000)
20,000

0.40

0.43

$
$

0.42
0.45

Income Statement
Cordobas
CRC
CRC
CRC
CRC
CRC

Operating Activities
net income
Adjustments to net income
Depreciation
Increase in Accounts Receivable
Increase in Accounts Payable
Increase in unearned rent
Net cash provided by operating activities
Investing Activities
purchase of land
purchase of builiding
net cash provide provided by investing activities
Financing Activities

200,000.00
170,000.00
30,000.00

(10,000.00)
20,000.00

Ordinary Shares issue

Mortgage Payable
Dividends Paid
Net cash provided by financing activities
effect on exchange rate on cash
Increase in cash

US$
$
$
$
$
$
$

22,500.00
9,000.00
45,000.00
225,000.00
(4,500.00)
220,500.00

297,000.00

Rate
0.43
0.43

0.42

Description
in early 2004(when common shares were issued and
the land and building were purchased, backed with a
mortgage.
Weighted average for 2004

at the time dividends were declared and the advanced

rent payment was received.
Current Rate

Statement
Rate

Cordobas
CRC

30,000

CRC
CRC
CRC
CRC
CRC

10,000
(20,000)
30,000
10,000
60,000

CRC
CRC
CRC

(100,000)
(500,000)
(600,000)

CRC
CRC
CRC
CRC

200,000
400,000
(10,000)
590,000

CRC

50,000

Nicaraguan Subsidiary
Balance Sheet
As of December 31st. 2004
Equity and liabilities
Accounts payable
Rent paid in advance
Mortgage payable

CRC
CRC
CRC

30,000
10,000
400,000

Common shares
CRC
Paid-in capital over and above p CRC
Retained earnings
CRC
Cumulative Exchange
Total equity and liabilities
CRC

40,000
160,000
20,000

US$
$

86,000.00

$
$

73,100.00
12,900.00

$
$

(4,200.00)
8,700.00

660,000

USDollars

Cash Flow Statement

US Dollars

Rate

0.43 $

12,900.00

0.43
0.43
0.43
0.42

$
$
$
$
$

4,300.00
(8,600.00)
12,900.00
4,200.00
25,700.00

0.4 $
0.4 $
$

(40,000.00)
(200,000.00)
(240,000.00)

0.4 $
0.4 $
0.42 $
$
$
$

80,000.00
160,000.00
(4,200.00)
235,800.00
1,000.00
21,500.00

Rate

US$
0.45 $
13,500.00
0.45 $
4,500.00
0.45 $ 180,000.00
0.4 $
16,000.00
0.4 $
64,000.00
$
8,700.00
$
10,300.00
$ 286,700.00