Pemex's foreign subsidiary, Semex, had stockholder's equity of 500,000 LCU on Jan. 1, 2026. For 2026, Semex reported net income of 100,000 LCU. On Feb. 1, 2026, Semex declared and paid a dividend of 20,000 LCU. Pemex uses the current rate method. Direct exchange rates information follows:
Jan. 1, 2026 - P0.78
Feb. 1, 2026 - P0.75
Ave. Rate for 2026 - P0.70
Dec. 31, 2026 - P0.65
What is the net effect of the above transactions on retained earnings?
a. 48,000 increase
b. 50,000 increase
c. 55,000 increase
d. None of the above
