2.On January 1, 20X9, Liv Ltd. (LL), a Canadian company, acquired 90% of Marcus Co. (MC), a foreign company for FC 623,200. At the acquisition date, the carrying value of MC's net assets equaled their fair value except for the equipment, which had a carrying value of FC 800,000 and a fair value of FC 880,000. At the acquisition date, MC's equipment had a remaining useful life of 10 years. There was an FC 5,000 impairment of the goodwill which occurred evenly throughout 20X9.

Selected financial statements for LL and MC are presented below.

Liv Ltd.

Statement of Financial Position

As of December 31, 20X9

(in $ CDN)

Assets:

Current assets:

Cash and cash equivalents$562,080

Accounts receivable700,000

Inventory1,376,000

2,638,080

Noncurrent assets:

Plant and equipment, net2,752,000

Investment in Marcus Co.1,558,000

4,310,000

Total assets$6,948,080

Liabilities and shareholders' equity:

Liabilities:

Current liabilities:

Accounts payable and accrued liabilities$923,600

Noncurrent liabilities:

Notes payable1,860,000

2,783,600

Shareholders' equity:

Share capital 1,562,960

Retained earnings 2,601,520

4,164,480

Total shareholders' equity and liabilities$6,948,080

Liv Ltd.

Statement of Income

For the year ended December 31, 20X9

(in $ CDN)

Sales$16,246,180

Dividend income405,900

16,652,080

Cost of sales$8,256,000

Other expenses*7,124,00015,380,000

Net income $ 1,272,080

*includes depreciation

LL declared and paid dividends of $928,000 CDN on December 31, 20X9.

Marcus Co.

Statement of Financial Position

(in FC)

Dec. 31,Jan. 1

20X920X9

Assets:

Current assets:

Cash360,000164,000

Accounts receivable408,000280,000

Inventory484,000364,000

1,252,000808,000

Noncurrent assets:

Equipment, net720,000800,000

Total assets1,972,0001,608,000

Liabilities and shareholders' equity:

Liabilities:

Current liabilities:

Accounts payable542,000422,000

Noncurrent liabilities:

Notes payable640,000640,000

Total liabilities1,182,0001,062,000

Shareholders' equity:

Share capital400,000400,000

Retained earnings390,000146,000

790,000546,000

Total shareholders' equity and liabilities1,972,0001,608,000

Marcus Co.

Statement of Income

For the year ended December 31, 20X9

(in FC)

Sales 8,400,000

Cost of sales5,304,000

Other expenses*2,688,0007,992,000

408,000

*includes depreciation

Marcus Co.

Statement of Changes in Equity - Retained Earnings Section

For the year ended December 31, 20X9

(in FC)

Retained earnings, January 1, 20X9 146,000

Net income408,000

Dividends declared (164,000)

Retained earnings, December 31, 20X9 390,000

MC declared and paid FC164,000 in dividends on December 31, 20X9.

Selected Exchange Rates

January 1, 20X9 FC1 = $2.50 CDN

December 31, 20X9 FC1 = $2.75 CDN

Date when ending inventory was purchased FC1 = $2.60 CDN

Average rate for 20X9 FC1 = $2.65 CDN

Prepare consolidated financial statements at December 31, 20X9, using

a.the functional currency translation (FCT) method (assuming the Canadian dollar is the functional currency) and

b. the presentation currency translation (PCT) method.