advanced financial accounting

On December 31, 2020, Johnson Inc. of Montreal paid $15,000,000 for 100% of the outstanding shares of Wilson Corp of New York, USA. Wilson's fair values approximated its book values on that date. Wilson's comparative balance sheets for 2020 and 2021 and its 2021 income statement are presented below: Balance Sheet as at December 31 (in U.S. Dollars) Current Monetary Assets Inventory Plant and Equipment (Net) Total Assets Current Liabilities Bonds Payable (due Dec 31, 2027) Common Shares Retained Earnings Total Liabilities and Equity 2021 $14,000,000 $3,500,000 $2,625,000 $20.125.000 $1,925.000 2020 $13,125.000 $5,250,000 $3,150,000 $21,525,000 $4,025,000 $8,750,000 $7,000,000 $2,450,000 $20,125.000 $8,750,000 $7,000,000 $1,750,000 $21,525.000 Total Liabilities and Equity $20,125,000 $21,525,000 Income Statement for the Year ended December 31, 2021 (in U.S. Dollars) Sales Inventory, January 1, 2020 Purchases Inventory, December 31, 2020 Depreciation Expense Other Expenses $9,100,000 $5,250,000 $5,250,000 -$3,500,000 $525,000 $700,000 $8,225,000 $875,000 Net Income Other Information: Exchange Rates: December 31, 2020: September 30, 2021 December 31, 2021: Average for 2021: US $1 = CDN $1.2000 US $1 - CDN $1.1875 US $1 = CDN $1.1750 US $1 = CDN $1.1900 dividends on September 30, 2021. The inventories on hand at the end of 2021 were purchased when the exchange rate was US$1 = CDN$1.1933 Sales, purchases and other expenses occurred evenly throughout the year. All of Wilson's current liabilities are monetary. Required PART A: Assume Wilson uses the same functional currency as Johnson Inc. (i.e., the Canadian dollar). a) Compute Wilson's 2021 exchange gain or loss. b) Translate Wilson's 2021 Income Statement c) Translate Wilson's December 31, 2021 Statement of Retained Earnings. d) Translate Wilson's December 31, 2021 Balance Sheet PART B: Assume Wilson's functional currency is the U.S. dollar. (ie, the functional currency of the foreign subsidiary is different than its parent's functional currency). Johnson presents its financial statements in its functional currency, Canadian dollars. a) Calculate the 2021 exchange gain or loss that would result from the transfation of Wilson's Financial Statements for consolidation purposes b) Prepare the 2021 Shareholders' Equity section of Wilson's translated balance sheet for consolidation purposes, PART C: What exposure is measured by the translation methods used above in calculating exchange gains/losses in Parts A & B above? Explain, for each method, bow your result is consistent with the 2021 exchange rate changes Patag B1 LR 7 = o c 3 2 8 6 7 9 5. . 2 0 P U R 7 F H N . 1? E C