Consolidating an International Subsidiary, Year of Acquisition On February 1, 2019, Pathway Inc., a U.S. company, acquired all of the outstanding shares of Superbarn Supermarkets, an Australian chain, for A$150 million in cash. Superbarn's assets and liabilities were reported at amounts approximating fair value, but it had previously unrecorded intangible assets (5-year life, straight-line) valued at A$10 million. Superbarn's functional currency is the Australian dollar (A$). Pathway uses the complete equity method to record its investment in Superbarn on its own books. The January 31, 2020 trial balances of the two companies are below. Pathway Superbarn (in thousands) Dr (Cr) Dr (Cr) Cash and receivables $ 15,000 A$ 5,000 Inventories 90,000 30,000 Plant and equipment, net 776,500 355,000 Investment in Superbarn 118,650 Liabilities (874,000) (345,000) Capital stock (25,000) (10,000) Retained earnings, February 1 (85,000) (20,000) Dividends 2,000 Sales revenue (1,500,000) (500,000) Equity in net income of Superbarn (6,000) Equity in other comprehensive loss of Superbarn 2,850 Cost of goods sold 1,000,000 400,000 Operating expenses 485,000 85,000 $0 A$ 0 Exchange rates: February 1, 2019 $0.77/A$ Average for fiscal 2020 0.75/A$ January 31, 2020 0.70/A$ Goodwill arising from the acquisition of Superbarn was impaired by A$5 million in fiscal 2020. a. Prepare a working paper to consolidate the trial balances of Pathway and Superbarn for fiscal 2020. 1. Translate Superbarn's January 31, 2020 trial balance. Use negative signs with Cr (credit balance) answers. $IAS Dr(Cr) $ $ Trial Balance (in thousands) Cash and receivables Inventories Property and equipment, net Liabilities Capital stock Retained earnings, February 1 Sales revenue Cost of goods sold Operating expenses Translation gain or loss A$ Dr(Cr) A$ 5,000 30,000 355,000 (345,000) (10,000) (20,000) (500,000) 400,000 85,000 (below) A$ 0 $ Do not use negative signs with any of your answers. Using the drop-down menu, select the appropriate answer to indicate a translation gain or translation loss. Translation Gain/Loss Schedule (in thousands) $ Net assets, beginning Net income A$ $/A$ AS $ Net assets, ending AS $ 2. Prepare consolidation working paper elimination journal entries (in thousands): Consolidation Journal Description Debit Credit (C) Ref. Investment in Superbarn (E) Capital stock > > (R) Identifiable intangibles Goodwill (0) Identifiable intangibles Goodwill 3. Complete Consolidation Working Paper Use negative signs with your credit (Cr) balance answers in the Superbarn and Consolidated Balances columns. Consolidation Working Paper Accounts Taken from Books Eliminations Pathway Superbarn Consolidated Balances (in thousands) Dr (Cr) Dr (Cr) Debit Credit Dr (Cr) Cash and receivables $ 15,000 $ $ Inventories 90,000 Plant and equipment, net 776,500 Investment in Superbarn 118,650 (C) (E) (R) Identifiable intangibles (R) Goodwill (0) Liabilities (874,000) Capital stock (25,000) (E) Retained earnings, February 1 (85,000) (E) Dividends 2,000 Sales revenue (1,500,000) Equity in net income-Superbarn (6,000) (C) Equity in OCL-Superbarn 2,850 (C) Cost of goods sold 1,000,000 Operating expenses 485,000 (0) Translation loss (R) (0) O O Total $0 $ $ $ $ b. Present the consolidated balance sheet and statement of comprehensive income for fiscal 2020, in good form. Do not use negative signs with your answers in the consolidated statement of comprehensive income below. Pathway Inc. and Subsidiary Consolidated Statement of Comprehensive Income For the Year Ended January 31, 2020 $ (in thousands) Sales revenue Cost of goods sold Gross margin Operating expenses Net income Translation loss (other comprehensive loss) Comprehensive income $ Do not use negative signs with your answers in the consolidated balance sheet below. Pathway Inc. and Subsidiary Consolidated Balance Sheet January 31, 2020 $ $ (in thousands) Assets Cash and receivables $ Inventories Plant and equipment, net Identifiable intangibles Goodwill Total assets Liabilities and shareholders' equity Liabilities Shareholders' equity: Capital stock Retained earnings Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity $ $ Consolidating an International Subsidiary, Year of Acquisition On February 1, 2019, Pathway Inc., a U.S. company, acquired all of the outstanding shares of Superbarn Supermarkets, an Australian chain, for A$150 million in cash. Superbarn's assets and liabilities were reported at amounts approximating fair value, but it had previously unrecorded intangible assets (5-year life, straight-line) valued at A$10 million. Superbarn's functional currency is the Australian dollar (A$). Pathway uses the complete equity method to record its investment in Superbarn on its own books. The January 31, 2020 trial balances of the two companies are below. Pathway Superbarn (in thousands) Dr (Cr) Dr (Cr) Cash and receivables $ 15,000 A$ 5,000 Inventories 90,000 30,000 Plant and equipment, net 776,500 355,000 Investment in Superbarn 118,650 Liabilities (874,000) (345,000) Capital stock (25,000) (10,000) Retained earnings, February 1 (85,000) (20,000) Dividends 2,000 Sales revenue (1,500,000) (500,000) Equity in net income of Superbarn (6,000) Equity in other comprehensive loss of Superbarn 2,850 Cost of goods sold 1,000,000 400,000 Operating expenses 485,000 85,000 $0 A$ 0 Exchange rates: February 1, 2019 $0.77/A$ Average for fiscal 2020 0.75/A$ January 31, 2020 0.70/A$ Goodwill arising from the acquisition of Superbarn was impaired by A$5 million in fiscal 2020. a. Prepare a working paper to consolidate the trial balances of Pathway and Superbarn for fiscal 2020. 1. Translate Superbarn's January 31, 2020 trial balance. Use negative signs with Cr (credit balance) answers. $IAS Dr(Cr) $ $ Trial Balance (in thousands) Cash and receivables Inventories Property and equipment, net Liabilities Capital stock Retained earnings, February 1 Sales revenue Cost of goods sold Operating expenses Translation gain or loss A$ Dr(Cr) A$ 5,000 30,000 355,000 (345,000) (10,000) (20,000) (500,000) 400,000 85,000 (below) A$ 0 $ Do not use negative signs with any of your answers. Using the drop-down menu, select the appropriate answer to indicate a translation gain or translation loss. Translation Gain/Loss Schedule (in thousands) $ Net assets, beginning Net income A$ $/A$ AS $ Net assets, ending AS $ 2. Prepare consolidation working paper elimination journal entries (in thousands): Consolidation Journal Description Debit Credit (C) Ref. Investment in Superbarn (E) Capital stock > > (R) Identifiable intangibles Goodwill (0) Identifiable intangibles Goodwill 3. Complete Consolidation Working Paper Use negative signs with your credit (Cr) balance answers in the Superbarn and Consolidated Balances columns. Consolidation Working Paper Accounts Taken from Books Eliminations Pathway Superbarn Consolidated Balances (in thousands) Dr (Cr) Dr (Cr) Debit Credit Dr (Cr) Cash and receivables $ 15,000 $ $ Inventories 90,000 Plant and equipment, net 776,500 Investment in Superbarn 118,650 (C) (E) (R) Identifiable intangibles (R) Goodwill (0) Liabilities (874,000) Capital stock (25,000) (E) Retained earnings, February 1 (85,000) (E) Dividends 2,000 Sales revenue (1,500,000) Equity in net income-Superbarn (6,000) (C) Equity in OCL-Superbarn 2,850 (C) Cost of goods sold 1,000,000 Operating expenses 485,000 (0) Translation loss (R) (0) O O Total $0 $ $ $ $ b. Present the consolidated balance sheet and statement of comprehensive income for fiscal 2020, in good form. Do not use negative signs with your answers in the consolidated statement of comprehensive income below. Pathway Inc. and Subsidiary Consolidated Statement of Comprehensive Income For the Year Ended January 31, 2020 $ (in thousands) Sales revenue Cost of goods sold Gross margin Operating expenses Net income Translation loss (other comprehensive loss) Comprehensive income $ Do not use negative signs with your answers in the consolidated balance sheet below. Pathway Inc. and Subsidiary Consolidated Balance Sheet January 31, 2020 $ $ (in thousands) Assets Cash and receivables $ Inventories Plant and equipment, net Identifiable intangibles Goodwill Total assets Liabilities and shareholders' equity Liabilities Shareholders' equity: Capital stock Retained earnings Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity $ $