Gramado Company was created as a wholly owned subsidiary of Porto Alegre Corporation onJanuary 1, Year 1. On that date, Porto Alegre invested $42,000 in Gramado’s capital stock.Given the exchange on that date of $0.84 per cruzeiro, the initial investment of $42,000 wasconverted into 50,000 cruzeiros (Cz). Other than the capital investment on January 1, therewere no transactions involving stockholders’ equity in Year 1. Gramado’s cruzeiro-denominatedfinancial statements for Year 2 are as follows: