dollar, acquired Minor Company, which operated in country X whose currency is the FC, by purchasing the entire share capital at book value. Minor's financial statements for the years ended 128.3 Translation of foreign currency financial statements 31 December 20x2 and 20x3 are shown below. MINOR COMPANY Income Statements For the Years Ended 31 December 20x2 and 20x3 20x2 FC 450,000 (220,000) 230,000 20x3 FC 500,000 (230,000) 270,000 Sales Cost of goods sold Gross profit.... Less: Depreciation expense Amortization expense. Operating expenses. Insurance expense Operating profit before tax Taxation Profit after tax. Dividends paid Retained earnings, 1 January Retained earnings, 31 December (22,500) (6,000) (138,000) (800) (167,300) 62,700 (12,700) 50,000 (25,000) 25,000 50,000 (30,000) (12,000) (152,300) (3,200) (197,500) 72,500 (14,000) 58,500 (25,000) 50,000 83,500 MINOR COMPANY Statements of Financial Position As at 31 December 20x2 and 20x3 20x2 FC 207,500 54,000 20x3 FC 277,500 42,000 Fixed assets (net) Patent Current assets: Inventories. Prepaid insurance Accounts receivable Cash 95,000 5,600 83,900 25,000 209,500 88,000 2,400 82,700 13,000 186,100 (continued) 9) Minor Company was incorporated on 1 January 20x1. MINOR COMPANY Statements of Financial Position As at 31 December 20x2 and 20x3 20x2 FC patent was acquired on 10 July 20x2 at a cost of FC 60,000. The estimated life of the patent was five years from the date of purchase. 20x3 Current liabilities: FC Accounts payable Tax payable (20,000) (24,000) Note payable. (30,000) (27,000) Other payables. (20,000) (20,000) (1,000) (1,100) (71,000) (72,100) Net current assets 138,500 Total assets less current liabilities ... 114,000 400,000 433,500 Long-term loan... 120,000 120,000 Share capital... 230,000 230,000 Retained earnings 50,000 83,500 400,000 433,500 Additional information: (a) At the date of acquisition, Minor Company's equity comprised share capital of FC 230,000 and retained earnings of FC 25,000. (b) Minor used FIFO inventory valuation. Purchases were made uniformly throughout the year. Opening inventories for 20x2 amounted to FC 87,000. Ending inventories for 20x2 and 20x3 were composed of units purchased when the exchange rates were FC 1 = $0.39 and FC 1 = $0.35, respectively (c) The insurance premium for a two-year policy was paid on 1 October 20x2. (d) Fixed assets comprised plant and equipment that were acquired as follows: Date purchased Cost (FC) 200,000 50,000 100,000 (e) Plant and equipment were depreciated over ten years on a straight line basis with no residual value. A full month's depreciation was taken in the month of acquisition. (f) The 1 January 20x1 10 July 20x2... 1 July 20x3 (h) Payments of dividends for 20x2 and 20x3 are as follows: Date Amount paid 31 March 20x2. 31 October 20x2.. 31 March 20x3.. 31 October 20x3. FC 10,000 FC 15,000 FC 10,000 FC 15,000 Exchange rates are as follows: FC 1 = 1 January 20x1 31 December 20x1 31 March 20x2 10 July 20x2.. 1 October 20x2 31 October 20x2 31 December 20x2 20x2 average rate 31 March 20x3. 1 July 20x3 31 October 20x3. 31 December 20x3 20x3 average rate $0.45 $0.43 $0.42 $0.40 $0.41 $0.405 $0.38 $0.415 $0.385 $0.37 $0.35 $0.34 $0.36 Required: Assume that the functional currency of Minor Company is the local currency, the FC. Translate the financial statements of Minor Company for the purpose of consolidation into Major's presentation currency for the years ended 31 December 20x2 and 20x3. Prepare a schedule to show the proof of translation gain or loss. P8.4 Translation of foreign currency financial statements Refer to the information provided in P8.3. Assume that the functional currency of Minor Company is the dollar. Translate the financial statements of Minor Company for the purpose of consolidation into Majors presentation currency for the years ended 31 December 20x2 and 20x3. Prepare a schedule to show the proof of translation gain or loss. dollar, acquired Minor Company, which operated in country X whose currency is the FC, by purchasing the entire share capital at book value. Minor's financial statements for the years ended 128.3 Translation of foreign currency financial statements 31 December 20x2 and 20x3 are shown below. MINOR COMPANY Income Statements For the Years Ended 31 December 20x2 and 20x3 20x2 FC 450,000 (220,000) 230,000 20x3 FC 500,000 (230,000) 270,000 Sales Cost of goods sold Gross profit.... Less: Depreciation expense Amortization expense. Operating expenses. Insurance expense Operating profit before tax Taxation Profit after tax. Dividends paid Retained earnings, 1 January Retained earnings, 31 December (22,500) (6,000) (138,000) (800) (167,300) 62,700 (12,700) 50,000 (25,000) 25,000 50,000 (30,000) (12,000) (152,300) (3,200) (197,500) 72,500 (14,000) 58,500 (25,000) 50,000 83,500 MINOR COMPANY Statements of Financial Position As at 31 December 20x2 and 20x3 20x2 FC 207,500 54,000 20x3 FC 277,500 42,000 Fixed assets (net) Patent Current assets: Inventories. Prepaid insurance Accounts receivable Cash 95,000 5,600 83,900 25,000 209,500 88,000 2,400 82,700 13,000 186,100 (continued) 9) Minor Company was incorporated on 1 January 20x1. MINOR COMPANY Statements of Financial Position As at 31 December 20x2 and 20x3 20x2 FC patent was acquired on 10 July 20x2 at a cost of FC 60,000. The estimated life of the patent was five years from the date of purchase. 20x3 Current liabilities: FC Accounts payable Tax payable (20,000) (24,000) Note payable. (30,000) (27,000) Other payables. (20,000) (20,000) (1,000) (1,100) (71,000) (72,100) Net current assets 138,500 Total assets less current liabilities ... 114,000 400,000 433,500 Long-term loan... 120,000 120,000 Share capital... 230,000 230,000 Retained earnings 50,000 83,500 400,000 433,500 Additional information: (a) At the date of acquisition, Minor Company's equity comprised share capital of FC 230,000 and retained earnings of FC 25,000. (b) Minor used FIFO inventory valuation. Purchases were made uniformly throughout the year. Opening inventories for 20x2 amounted to FC 87,000. Ending inventories for 20x2 and 20x3 were composed of units purchased when the exchange rates were FC 1 = $0.39 and FC 1 = $0.35, respectively (c) The insurance premium for a two-year policy was paid on 1 October 20x2. (d) Fixed assets comprised plant and equipment that were acquired as follows: Date purchased Cost (FC) 200,000 50,000 100,000 (e) Plant and equipment were depreciated over ten years on a straight line basis with no residual value. A full month's depreciation was taken in the month of acquisition. (f) The 1 January 20x1 10 July 20x2... 1 July 20x3 (h) Payments of dividends for 20x2 and 20x3 are as follows: Date Amount paid 31 March 20x2. 31 October 20x2.. 31 March 20x3.. 31 October 20x3. FC 10,000 FC 15,000 FC 10,000 FC 15,000 Exchange rates are as follows: FC 1 = 1 January 20x1 31 December 20x1 31 March 20x2 10 July 20x2.. 1 October 20x2 31 October 20x2 31 December 20x2 20x2 average rate 31 March 20x3. 1 July 20x3 31 October 20x3. 31 December 20x3 20x3 average rate $0.45 $0.43 $0.42 $0.40 $0.41 $0.405 $0.38 $0.415 $0.385 $0.37 $0.35 $0.34 $0.36 Required: Assume that the functional currency of Minor Company is the local currency, the FC. Translate the financial statements of Minor Company for the purpose of consolidation into Major's presentation currency for the years ended 31 December 20x2 and 20x3. Prepare a schedule to show the proof of translation gain or loss. P8.4 Translation of foreign currency financial statements Refer to the information provided in P8.3. Assume that the functional currency of Minor Company is the dollar. Translate the financial statements of Minor Company for the purpose of consolidation into Majors presentation currency for the years ended 31 December 20x2 and 20x3. Prepare a schedule to show the proof of translation gain or loss