Balfour Corporation acquired 100% of Tobac Inc., a foreign corporation, for 33,000,000 FC. The acquisition, which was accounted for as a purchase, occurred on July 1, 20x5, when Tobac's equity, in FC, was as follows:

Common Stock $19,000,000 FC

Paid-in capital in excess of par 8,480,000

Retained Earnings 2,520,000

Any excess of of cost over book value is traeable to equipment which is to be depreciated over 10 years. Balfour uses the simple equity method to account for its investment in Tobac.

On April 1, 20X7, Tobac acquired additional equipment costing 4,000,000 FC. Equipment is depreciated by the straight-line method over 10 years. No other equipment had been acquired or disposed of since 20X4. Tobac employs the LIFO inventory method. Ending inventory on December 31, 20X7, consists of the following:

Acquired in the 1st quarter of 20X4 1,000,000 FC

Acquired in the 1st quarter of 20X5 500,000

Acquired in the 1st quarter of 20X7 6,500,000

The cost of sales is traceable to goods purchased during 20 x 7 as follows:

Acquired uniformly over the last nine months 23,400,000

Acquired in the 1st quarter 4,200,000

Other expenses were incurred evenly over the year.

On April 1, 20X7, Tobac borrowed $1,280,000 from parent company in order to help finance the purchase of equipment. The note is due in one year and bears interest at the rate of Various spot rates are as follows:

1 FC = $0.60

1st Quarter, 20X4 Average $0.46 December 31, 20X6 $0.60

20X4 Average 0.49 1st quarter, 20X7 Average 0.62

Janujary 1, 20x5 0.51 April 1, 20x7 0.64

1st quarter, 20x5 Average 0.53 20X7 Average 0.67

July 1, 20X5 0.55 Last nine months, 20X7 Average 0.66

December 31, 20x5 0.58 December 31, 2017 0.65

Last six months, 20X5 0.57

20X6 Average 0.58

The December 31, 20x7, trial balances for Tobac and Balfour are as follows:

Balfour Tobac

Corp. Inc.

Cash $4,462,200 $3,087,385 FC

Net Accounts Receivable 15,350,000 12,000,000

INventory 16,300,000 8,000,000

Due from Tobac 1,356,800

Investment in Tobac-See Note A 23,712.363

Depreciable Assets 68,000,000 34,000,000

Accumulated Depreciation (42,000,000) ( 12,300,000)

Due to Balfour (2,087,385)

Other Liabilities (27,000,000) ( 3,700,000)

Common STock (35,000,000) (19,000,000)

Paid-In Capital in Excess of Par (2,000,000) (8,480,000)

Retained Earnings, January 1, 2017 (4,500,000) (7,520,000)

Sales (98,000,000) (40,000,000)

Cost of Sales 64,000,000 27,600,000

Depreciation Expense 8,076,800 3,300,000

Interest Expense on Balfour

Loan (accrued on December 31, 20x7)-See Note B 118,154

Exchange Gain on Balfour Loan-See Note 8 (30,769)

Other Expenses 10,000,000 5,012,615

Interest Income (76,800)

Subsidiary Income (2,682,363)

Total $ 0 0FC

Note A-Balfour's investmentin Tobac consists of the following:

Initial investment (33,000,000 FC x $0.55) $18,150,000

Last six months, 20X5 income (2,000,000 FC x $0.57 1,140,000

20X6 income (3,000,000 FC x $0.58) 1,740,000

20X7 income 2,682,363

Balance $23,712,363

Note B-The original loan from Balfour was 2,000,000 FC, or $1,280,000(2,000,000 FC x $0.64). On December 31, 20x7, it would require 1,969,231 FC ($1,280,000 + $0.65) to settle the loan. This represents on exchange gain of 30,769 FC (2,000,000 FC - 1,969,231 FC).

The year-end balance due to Balfour is determined as follows:

Principal Balance $1,969,231 FC

Accrued interest ($1,280,000) x 8% x 9/12 + $0.65) 118,154

Balance $2,087,385FC

The interest is accrued at year-end; therfore,interest expense should be translatedat the year-end rate.

Assuming the FC is Tobac's functional currency, translate Tobac's trial balance, and prepare a consolidating worksheet.