3.650 Problem 11-6 LO3,4,5 On January 1, Year 4, P Company (a Canadian company) purchased 90% of Company located in a foreign coun- try) at a cost of 15,580 foreign currency units (FC). The carrying amounts of S Company's net assets were equal to fair values on this date except for plant and equipment, which had a fair value of FC22,000, with a remaining useful life of 10 years. A goodwill impairment loss of FC100 occurred evenly throughout Year 4. The following exchange rates were in effect during Year 4: Jan. 1 FCI = $1.10 Average for year FCI = $1.16 When ending inventory purchased FCI = $1.19 Dec. 31 FCI = $1.22 The statement of financial position of s Company on January 1, Year 4, is as follows: S Company (FC) Plant and equipment (net) 20,000 Inventory 9,100 Monetary assets (current) 11.100 40,200 Ordinary shares 10,000 Retained earnings Bonds payable (mature in eight years) 16,000 Current liabilities 10,550 40,200 The December 31, Year 4, financial statements of P Company (in $) and S Company (in FC) are shown below: STATEMENT OF FINANCIAL POSITION P Company ($) Company (FC) Plant and equipment (net) 68,800 Investment in S Company (at cost) 17,138 Inventory 34,400 12,100 Monetary assets (current) 31,552 19,200 151,890 49,300 Ordinary shares 34,400 10,000 Retained carnings 47.900 9,750 Bonds payable 46,500 16,000 Current monetary liabilities 23,090 13,550 151,890 49,300 INCOME STATEMENT Sales 411,800 210,000 Dividend income 4,502 Cost of sales (206,400) (132,600) Other expenses (including depreciation) (178,100) (67,200) 31.802 10.200 18,000 Profit 12.100 19,200 49,300 10,000 Investment in s Company (at cost) 17,138 Inventory 34,400 Monetary assets (current) 31,552 151,890 Ordinary shares 34,400 Retained earnings 47,900 Bonds payable 46,500 Current monetary liabilities 23,090 151,890 INCOME STATEMENT Sales 411,800 Dividend income 4,502 Cost of sales (206,400) Other expenses (including depreciation) (178,100) Profit 31.802 9,750 16,000 13.550 49,300 210,000 (132,600) (67,200) 10,200 697 CHAPTER 11 Translation and Consolidation of Foreign Operations Dividends were declared on December 31, Year 4, in the amount of $23,200 by P Company and FC4,100 by S Company Required (a) Prepare the December 31, Year 4, consolidated financial statements, assuming that s Company's functional currency is: (1) The Canadian dollar (ii) The foreign currency unit (b) Now assume that P Company is a private company. It uses ASPE and has chosen to use the equity method to report its investment in S Company. Calculate the balance in the investment account at December 31, Year 4, assuming that S Company's functional currency is the Canadian dollar. (c) Prepare the consolidated financial statements using the worksheet approach for the two scenarios for functional currency. e cel 3.650 Problem 11-6 LO3,4,5 On January 1, Year 4, P Company (a Canadian company) purchased 90% of Company located in a foreign coun- try) at a cost of 15,580 foreign currency units (FC). The carrying amounts of S Company's net assets were equal to fair values on this date except for plant and equipment, which had a fair value of FC22,000, with a remaining useful life of 10 years. A goodwill impairment loss of FC100 occurred evenly throughout Year 4. The following exchange rates were in effect during Year 4: Jan. 1 FCI = $1.10 Average for year FCI = $1.16 When ending inventory purchased FCI = $1.19 Dec. 31 FCI = $1.22 The statement of financial position of s Company on January 1, Year 4, is as follows: S Company (FC) Plant and equipment (net) 20,000 Inventory 9,100 Monetary assets (current) 11.100 40,200 Ordinary shares 10,000 Retained earnings Bonds payable (mature in eight years) 16,000 Current liabilities 10,550 40,200 The December 31, Year 4, financial statements of P Company (in $) and S Company (in FC) are shown below: STATEMENT OF FINANCIAL POSITION P Company ($) Company (FC) Plant and equipment (net) 68,800 Investment in S Company (at cost) 17,138 Inventory 34,400 12,100 Monetary assets (current) 31,552 19,200 151,890 49,300 Ordinary shares 34,400 10,000 Retained carnings 47.900 9,750 Bonds payable 46,500 16,000 Current monetary liabilities 23,090 13,550 151,890 49,300 INCOME STATEMENT Sales 411,800 210,000 Dividend income 4,502 Cost of sales (206,400) (132,600) Other expenses (including depreciation) (178,100) (67,200) 31.802 10.200 18,000 Profit 12.100 19,200 49,300 10,000 Investment in s Company (at cost) 17,138 Inventory 34,400 Monetary assets (current) 31,552 151,890 Ordinary shares 34,400 Retained earnings 47,900 Bonds payable 46,500 Current monetary liabilities 23,090 151,890 INCOME STATEMENT Sales 411,800 Dividend income 4,502 Cost of sales (206,400) Other expenses (including depreciation) (178,100) Profit 31.802 9,750 16,000 13.550 49,300 210,000 (132,600) (67,200) 10,200 697 CHAPTER 11 Translation and Consolidation of Foreign Operations Dividends were declared on December 31, Year 4, in the amount of $23,200 by P Company and FC4,100 by S Company Required (a) Prepare the December 31, Year 4, consolidated financial statements, assuming that s Company's functional currency is: (1) The Canadian dollar (ii) The foreign currency unit (b) Now assume that P Company is a private company. It uses ASPE and has chosen to use the equity method to report its investment in S Company. Calculate the balance in the investment account at December 31, Year 4, assuming that S Company's functional currency is the Canadian dollar. (c) Prepare the consolidated financial statements using the worksheet approach for the two scenarios for functional currency. e cel