Question
Dove Corporation of Toronto acquired 100% of the outstanding common shares of Astral company of Libya on January 1 of Year 7. On this date,
Dove Corporation of Toronto acquired 100% of the outstanding common shares of Astral company of Libya on January 1 of Year 7. On this date, the fair values of Astral company's identifiable assets and liabilities were equal to their carrying amounts. Astrals financial statements for the year ended December 31, Year 9 are presented as follows:
BALANCE SHEET | |||
At December 31, Year 9 | |||
Cash and cash equivalents | LYD | 862,500 | |
Accounts receivable | 751,500 | ||
Inventory | 899,500 | ||
Plant and equipment (net) | 1,601,500 | ||
LYD | 4,115,000 | ||
Accounts payable | LYD | 806,500 | |
Notes payable | 201,500 | ||
Common shares | 1,001,500 | ||
Retained earnings | 2,105,500 | ||
LYD | 4,115,000 | ||
INCOME STATEMENT | |||
For the year ended December 31, Year 9 | |||
Sales | LYD | 6,207,500 | |
Inventory, Jan. 1 | 1,422,500 | ||
Purchases | 3,939,500 | ||
Inventory, Dec. 31 | (899,500) | ||
Depreciation expense | 201,500 | ||
Other expenses | 505,500 | ||
5,169,500 | |||
Profit | LYD | 1,038,000 | |
Additional Information
- Exchange rates
January 1, Year 7 | LYD1 | = | $0.74 |
January 1, Year 8 | LYD1 | = | $0.52 |
Average for Year 8 | LYD1 | = | $0.54 |
Sep. 30, Year 9 | LYD1 | = | $0.62 |
Dec. 31, Year 9 | LYD1 | = | $0.65 |
Average for Year 9 | LYD1 | = | $0.58 |
- Astral Company declared and paid dividends on September 30, Year 9.
- The inventories on hand on December 31, Year 9, were purchased when the exchange rate was LYD1 = $0.63.
- All inventory on hand at the beginning of Year 9 were purchased evenly in Year 8.
- The plant and equipment were purchased on January 1, Year 8 and are being amortized on a straight line basis over its estimated useful life of 10 years.
- All sales and purchases and other expenses occurred evenly throughout the year.
- On January 1, Year 9, the retained earnings of Astral Company was LYD 1,964,500 which amounted to $1,041,500 Canadian dollars.
Required:
(a) Assume that Astrals functional currency is the Canadian dollar, prepare translated financial statements for Year 9. (Hint: Prepare the balance sheet first and your retained earnings number will be a plug. Use the translated retained earnings to prepare the retained earnings statement and your profit figure will be a plug.) (Round the Rate answers to 2 decimal places. Exchange gain, if any, should be entered as positive value, and Exchange loss, if any, should be entered with a minus sign. Input all other amounts as positive values. Omit currency symbol in your response.)
Balance Sheet - December 31, Year 9 | ||||||
Cash and cash equivalents | LYD | 862,500 | $ | |||
Accounts receivable | 751,500 | |||||
Inventory | 899,500 | |||||
Plant and equipment (net) | 1,601,500 | |||||
LYD | 4,115,000 | $ | ||||
Accounts payable | LYD | 806,500 | $ | |||
Notes payable | 201,500 | |||||
Common shares | 1,001,500 | |||||
Retained earnings | 2,105,500 | Plug | ||||
LYD | 4,115,000 | $ | ||||
Retained Earnings Statement Year 9 | ||||||
Bal. Jan. 1 | LYD | 1,964,500 | given | $ | ||
Net income | 1,038,000 | plug | ||||
3,002,500 | ||||||
Dividends | 897,000 | |||||
Closing retained earnings | LYD | 2,105,500 | B/S above | $ | ||
Income Statement - Year 9 | ||||||
Sales | LYD | 6,207,500 | $ | |||
Cost of goods sold | 4,462,500 | Note 1 | ||||
Depreciation expense | 201,500 | |||||
Other expenses | 505,500 | |||||
(Click to select) Exchange gain Exchange loss | ||||||
5,169,500 | ||||||
(Click to select) Net income Net loss | LYD | 1,038,000 | $ | |||
(b) Assume that Astrals functional currency is the Libyan dinar, prepare translated financial statements for Year 9 if the translated retained earnings at January 1, Year 9 under the presentation currency translation method is $1,231,500 Canadian dollars and there was no prior balance in Accumulated Other Comprehensive Income. (Hint: Prepare the income statement first and then the statement of retained earnings. Use the translated retained earnings to prepare the balance sheet and the exchange gain or loss in OCI will be a plug.) (Round the Rate answers to 2 decimal places. Exchange gain, if any, should be entered as positive value, and Exchange loss, if any, should be entered with a minus sign. Input all other amounts as positive values. Omit currency symbol in your response.)
Income Statement - Year 9 | ||||||
Sales | LYD | 6,207,500 | $ | |||
Cost of goods sold | 4,462,500 | |||||
Depreciation expense | 201,500 | |||||
Other expenses | 505,500 | |||||
5,169,500 | ||||||
(Click to select) Net income Net loss | LYD | 1,038,000 | $ | |||
Retained Earnings Statement Year 9 | ||||||
Bal. Jan. 1 | LYD | 1,964,500 | given | $ | ||
Net income | 1,038,000 | |||||
3,002,500 | ||||||
Dividends | 897,000 | |||||
Closing retained earnings | LYD | 2,105,500 | B/S above | $ | ||
Balance Sheet - December 31, Year 9 | ||||||
Cash and cash equivalents | LYD | 862,500 | $ | |||
Accounts receivable | 751,500 | |||||
Inventory | 899,500 | |||||
Plant and equipment (net) | 1,601,500 | |||||
LYD | 4,115,000 | $ | ||||
Accounts payable | LYD | 806,500 | $ | |||
Notes payable | 201,500 | |||||
Common shares | 1,001,500 | |||||
Retained earnings | 2,105,500 | From RE | ||||
(Click to select) OCI - Exchange gain OCI - Exchange loss | Plug | |||||
LYD | 4,115,000 | $ | ||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started