ending retained earnings

Hise Home Supply is a large, profitable home improvement retailer located in the United Kingdom. Hise has recently been acquiring niche retailers with popular brand names in certain segments of the home improvement market. One of these retailers was Wilson Tile and Stone, a U.S. business that derived a large part of its sales from the UK. The management team for Hise now makes all operating, financing, and investment decisions. Brian Heltzel, a financial analyst for Hise, is responsible for translating Wilson’s financial statements from U.S. dollars to the reporting currency. Hise conducts its business and issues financial statements in British pounds (£). Wilson Tile and Stone – December 31, 2008 Balance Sheets 2008 Cash $1,400 Accounts receivable 9,900 Inventory 12,400 Curren assets $23,700 Fixed assets 40,000 Accumulated depreciation 15,000 Net fixed assets $25,000 TOTAL ASSETS $48,700 Accounts payable $6,000 Current portion of LT debt 1,500 Long term debt 23,500 Total liabilities $31,000 Common stock 10,000 Retained earnings beginning: 6600 ending : 7,700 Total equity $17,700 TOTAL LIABILITIES and EQUITY $48,700 Revenue $75,000 Cost of goods sold (60,000) Gross margin $15,000 Other expenses (2,300) Depreciation expense (5,000) Net Income $7,700 Suppose that 2008 income before remeasurement gain/loss is £4,138. Dividends paid during the year are £2,250, and beginning retained earnings are £5,150. The remeasurement gain/loss for 2008 will be closest to: 285 pounds Net income = ending retained earnings − beginning retained earnings + dividends paid. Net income = 7323 - 5150 + 2250 = £4423. Remeasurement gain = net income -net income before remeasurement gain = 4423 - 4138 = £285. How do I get ending retained earnings of 7323£ ???

december 31 2007 rate is: £ = 1.60$ december 31 2008 rate is £ = 1.80$ average for 2008 rate is £ = 1.70$ Historical rate for fixed assets, inventory and equity: £ = 1.50$

2008 Cash 1,400 1.80 778 Accounts receivable 9,900 1.80 5500 Inventory 12,400 1.5 8267 Net fixed assets $25,000 1.5 16667 TOTAL ASSETS $48,700 31212 Total liabilities 31,000 1.8 17222 Common stock 10,000 1.5 6667 RE = 31212 - (17222+6667)=7323 But there seems to be an inconsistent rate usage of 1.5 for Historic inventory (inconsistent with FIFO Inventory). In FIFO - First pieces that come in are used in the COGS. So by Historic Inventory and in the absence of “uniform usage” - current rate of 1.8$ should be used for Inventory on the Balance sheet - which has not been done above.

thank you!!!

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