Advanced Accounting Winter 2022 Due Thursday, March 3, at 11:59 pm on canvas (30 points) Typed On 1/1/19, Paper Corporation purchased 100 percent of Simple Company at a cost of $750,000. Paper is a U.S.-based company and Simple is in Sao Paulo, Brazil. Paper uses the equity method to account for its investment in Simple. Simple had 400,000 REAL Common Stock, 300,000 REAL APIC, and 700,000 REAL retained earnings at the acquisition date. Any fair value/book value difference is attributable to a patent with a 10-year life. During 2019, the first year of joint operation, Simple reported income of 400,000 REAL which was earned evenly throughout the year. And paid a dividend of 100,000 REAL to Paper on June 1. Simple's functional currency is the Brazilian REAL. The exchange rates for 1 REAL are as follows: 1/1/19 $.30 6/1/19 $.32 Weighted average 2019 $.34 12/31/19 $.35 6/1/20 (dividend date) $.36 Weighted average 2020 $.38 12/31/20 $.40 1. Show that the beginning 2019 Investment in Simple balance on Paper's books is: $941,500. (Hint: you will need to translate Simple's income and dividends as well as compute the change in OCI for the year). 2. Prepare the translated financial statements of Simple assuming the equipment sales occurred on 6/1/20. 3. Prepare the consolidation entries and worksheet for Paper and Simple. Paper/Simple Pre-translation consolidation financials 12/31/20 Sales Cost of goods sold Salary Expense Rent Expense Other Expense Gain on sale of fixed asset Investment Income-Simple Net Income Paper Simple ($) REAL 2,000,000 1,750,000 -1,200,000 -900,000 -200,000 - 150,000 -20,000 -75,000 -21,500 -60,000 20,000 ? ? 585,000 ? Retained Earnings 1/1/20 Net Income Dividends ? 50,000 1,000,000 585,000 100,000 Retained Earnings 12/31/20 ? 1,485,000 Cash and Receivables Inventory Prepaid items Investment in Simple Fixed assets (net) 500,000 400,000 70,000 ? 950,000 600,000 640,000 0 1,475,000 Total Assets ? 2,715,000 Accounts payable Notes payable-due 2025 Common stock Additional paid-in capital Retained Earnings OCI Total liabilities & Owners Eq. 200,000 200,000 500,000 400,000 ? ? ? 250,000 280,000 400,000 300,000 1,485,000 0 2,715,000 Advanced Accounting Winter 2022 Due Thursday, March 3, at 11:59 pm on canvas (30 points) Typed On 1/1/19, Paper Corporation purchased 100 percent of Simple Company at a cost of $750,000. Paper is a U.S.-based company and Simple is in Sao Paulo, Brazil. Paper uses the equity method to account for its investment in Simple. Simple had 400,000 REAL Common Stock, 300,000 REAL APIC, and 700,000 REAL retained earnings at the acquisition date. Any fair value/book value difference is attributable to a patent with a 10-year life. During 2019, the first year of joint operation, Simple reported income of 400,000 REAL which was earned evenly throughout the year. And paid a dividend of 100,000 REAL to Paper on June 1. Simple's functional currency is the Brazilian REAL. The exchange rates for 1 REAL are as follows: 1/1/19 $.30 6/1/19 $.32 Weighted average 2019 $.34 12/31/19 $.35 6/1/20 (dividend date) $.36 Weighted average 2020 $.38 12/31/20 $.40 1. Show that the beginning 2019 Investment in Simple balance on Paper's books is: $941,500. (Hint: you will need to translate Simple's income and dividends as well as compute the change in OCI for the year). 2. Prepare the translated financial statements of Simple assuming the equipment sales occurred on 6/1/20. 3. Prepare the consolidation entries and worksheet for Paper and Simple. Paper/Simple Pre-translation consolidation financials 12/31/20 Sales Cost of goods sold Salary Expense Rent Expense Other Expense Gain on sale of fixed asset Investment Income-Simple Net Income Paper Simple ($) REAL 2,000,000 1,750,000 -1,200,000 -900,000 -200,000 - 150,000 -20,000 -75,000 -21,500 -60,000 20,000 ? ? 585,000 ? Retained Earnings 1/1/20 Net Income Dividends ? 50,000 1,000,000 585,000 100,000 Retained Earnings 12/31/20 ? 1,485,000 Cash and Receivables Inventory Prepaid items Investment in Simple Fixed assets (net) 500,000 400,000 70,000 ? 950,000 600,000 640,000 0 1,475,000 Total Assets ? 2,715,000 Accounts payable Notes payable-due 2025 Common stock Additional paid-in capital Retained Earnings OCI Total liabilities & Owners Eq. 200,000 200,000 500,000 400,000 ? ? ? 250,000 280,000 400,000 300,000 1,485,000 0 2,715,000