BUS FPX 4063 Assessment 3 Foreign Currency

Student Name

Capella University

BUS-FPX4063 Advanced Financial Accounting Topics and Trends

Prof. Name:

Date

Financial Statement Analysis and Translation

Yearly Interest Expense and Foreign Exchange Losses

The table below summarizes the interest expenses and foreign exchange losses incurred over three years, from 2018 to 2020. These expenses contribute to the total financial impact for each year.

Year	Interest Expense (USD)	Foreign Exchange Loss (USD)	Total (USD)
2018	600	5,000	5,600
2019	2,725	20,075	22,800
2020	2,475	25,125	27,600

The financial data reveal that both interest expenses and foreign exchange losses increased significantly over the years, reflecting broader operational or macroeconomic challenges.

Income Statement Translation for Broadmore Company Subsidiary

The financial statements for Broadmore Company’s foreign subsidiary were translated into U.S. dollars using the applicable exchange rates for each transaction. The following tables display the translation of the income statement and retained earnings statement.

Subsidiary Income Statement Translation

Item	Amount in Krone	Exchange Rate (USD)	Amount in USD
Rent revenue	120,000	$1.80	$216,000
Interest expense	(20,000)	$1.80	($36,000)
Depreciation expense	(28,000)	$1.80	($50,400)
Repair expense	(8,000)	$1.75	($14,000)
Net income	64,000		$115,600

Statement of Retained Earnings

Item	Amount in Krone	Exchange Rate (USD)	Amount in USD
Retained earnings
Net income	64,000		$115,600
Dividends paid	(10,000)	$1.70	($17,000)
Retained earnings	(54,000)		$98,600

Balance Sheet Translation and Adjustments

The subsidiary’s balance sheet was also translated into U.S. dollars, reflecting adjustments for exchange rate fluctuations.

BUS FPX 4063 Assessment 3 Foreign Currency

Asset/Liability	Amount in Krone	Exchange Rate (USD)	Amount in USD
Cash	82,000	$1.80	$147,600
Accounts receivable	20,000	$1.80	$36,000
Building	280,000	$1.80	$504,000
Accumulated depreciation	(28,000)	$1.80	($50,400)
Total assets	354,000		$637,200
Interest payable	(20,000)	$1.80	($36,000)
Note payable	(200,000)	$1.80	($360,000)
Common stock	(80,000)	$1.90	($152,000)
Retained earnings	(54,000)	$1.80	($97,200)
Translation adjustment			($8,000)

Translation Adjustment Computation
Adjustments due to changes in the exchange rate are calculated as follows:

Item	Amount in Krone	Exchange Rate (USD)	Amount in USD
Issued common stock	80,000	$1.90	$152,000
Increase in net assets (NI)	64,000	$1.80	$115,200
Dividends paid	(10,000)	$1.70	($17,000)
Ending net assets	134,000		$250,200
At current exchange rate		$1.70	$227,800
Translation adjustment			($22,400)

References

American Psychological Association. (2020). Publication manual of the American Psychological Association (7th ed.). Washington, DC: Author.