EVA Company was incorporated on January 2. Year 5, and commenced active operations immediately. Ordinary shares were issued on the date of incorp oration and no new ordinary shares have been issued since then. On December 31. Year 9, PAL Company purchased 70% ofthe outstanding ordinary shares ofthe EVA for 1.9 million euros (J. 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 Gem'ian 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 produ ct. It built a new distribution centre in Frankfurt. This facility was nanced with retained earn in gs from EVA Company. For the year ending December 31, Year 13, the condensed income statement for EVA was as follows: \"A mm warm 1m 5m\"! Year ended December 31, Year 13 Sales and other revenue 0: 4,430,000 Cost of goods sold 1, 993,500 Depreciation expense 134 , 0 00 Loss on decline in value of inventory 31,600 Other expenses 1 , 933 ,400 Total expenses 4 , 192 ,500 Net income 1: 237,500 1 The condensed balance sheet for EVA was as follows: WA mm lm sen-r At December 31, Year 13 Inventory (Note 1) I! 354 , 600 Property , plant , and equipment {net} (Note 2 J 1 , H40 , 0 00 other assets 2:515:00\" Total assets g 4:709:500 Unearned revenue [Note 3 J t 465 , 0 00 other monetary liabilities 2 , 505 , 0 00 Ordinary shares 100 , 0 00 Retained earnings 1 r 539 r 500 Total liabilities and shareholders ' equi ty t 4 v 7139 v 5 00 1 Notes and Additional Information 1. At December 31, Year 12, inventory was 315,000. The inventory at the end of Year 12 and Year 13 was purchased evenly throughout the last month of each year. The inventory at December 31. Year 13, had cost EVA 386,2 00 but had been written down to its net realizable value of 354,500. Purchases and sales of inventory occurred evenly throughout the year. 2. EVA purchased its property. plant, and equipment on March 17, Year 9. There were no purchases or sales of property, plant, and equipment since March 1?. Year 9. 3. The unearned revenue represents non-refundable deposits received from customers evenly throughout the last quarter of the year. 4. Foreign exchange rates were as follows: January 2, Year 5 1 I $1.35 March 1?, Year 9 1 I $1.30 December 31, Year 9 1 I $1.29 Average for Year 12 1 I $1.20 Average for quarter 4 for Year 12 1 I $1.19 Average for December Year 12 1 I $1_17 December 31, Year 12 1 I $1.15 Average for Year 13 1 I $1.13 Average for quarter 4 for Year 13 1 I $1.12 Average for December Year 13 1 I $1.11 December 31, Year 13 1 I $1.10
