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EVA Company was incorporated on January 2, Year 5, and commenced active operations immediately. Ordinary shares were issued on the date of incorporation and

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EVA Company was incorporated on January 2, Year 5, and commenced active operations immediately. Ordinary shares were issued on the date of incorporation and no new ordinary shares have been issued since then. On December 31, Year 9, PAL Company purchased 70% of the outstanding ordinary shares of the EVA for 1.8 million euros (). EVA's main operations are located in Germany. It manufactures and sells German equipment throughout Europe. PAL acquired control over EVA so that it could utilize EVA's extensive distribution network. EVA continued to manufacture and sell German equipment. However, it also purchases and sells equipment manufactured by PAL in Canada. EVA has 90 days to pay for its purchases from PAL. During this time, EVA is usually able to resell the equipment in Europe and collect the receivables. EVA did not have to hire additional sales people to sell the product. It built a new distribution centre in Frankfurt. This facility was financed with retained earnings from EVA Company. For the year ending December 31, Year 13, the condensed income statement for EVA was as follows: EVA COMPANY CONDENSED INCOME STATEMENT Year ended December 31, Year 13 Sales and other revenue Cost of goods sold Depreciation expense Loss on decline in value of inventory Other expenses Total expenses Net income The condensed balance sheet for EVA was as follows: EVA COMPANY BALANCE SHEET At December 31, Year 13 5,170,000 2,326,500 180,200 37,200 1,875,800 4,419,700 750,300 Inventory (Note 1) Property, plant, and equipment (net) (Note 2) Other assets Total assets Unearned revenue (Note 3) Other monetary liabilities Ordinary shares Retained earnings Total liabilities and shareholders' equity 314,400 1,802,000 2,880,000 4,996,400 402,000 2,810,000 100,000 1,684,400 4,996,400

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