Hiffmax Motor Services Company (Hiffmax) is an European corporation that manufactures commercial vehicles and passenger cars in many countries in North America, South America, Asia and Europe; it also provides financial services. To finance the automotive operations, Hiffmax has raised capital from share issues and external bonds issues. Its shares are listed on the London Stock Exchange and it has been using IFRS for financial reporting purposes.

Due to the economic recession and the fierce competition in the South America, Hiffmax has experienced low sales in this market in recent years. As a result, Hiffmaxs board of directors decided to dispose of its South America unit in 2019. Negotiation with SSS Group was ongoing in 2020 and a purchase agreement was reached on November 1, 2020. On January 8, 2021, the company finalized the sale to SSS Group for a total cash price of $1.05 billion. Some of the proceeds from the sale (220 million) were used to reduce its pension liabilities two weeks later, with the remaining amount available for operating requirements and investments. For comparative purposes, the same South America units assets were held for sale at a net book value of $1.137 billion as of December 31, 2020. The division had a small operating loss of $3.52 million before income taxes in 2020. No deprecation was recorded for the divisions assets since it ceased operations later during the year.

It is now January 25, 2021. Hiffmax is in the process of preparing its year-end financial statements for an audit. However, necessary adjustments must be made to several account before books for the year can be closed. As an accounting intern of Hiffmax, your supervisor asked you to complete this project and finalize the balance sheet and income statement (including the earnings per share disclosures) for the year ended December 31, 2020. You are aware that proper calculations for income tax returns have been completed. The draft copy of the consolidated balance sheet as of December 31, 2020 and consolidated income statement for the year ended December 31, 2020 with accompany notes (Appendix 1) have been provided for your reference. The applicable income tax rate for 2020 is 21%.

If a revision or an adjustment is necessary, please enclose supporting discussions, along with necessary calculations, adjusting entries, and closing entries.

Note: for convenience, all values in this case have been converted into the US dollars.

832 Appendix 1 - (Draft Copy) Statement of Financial Position (In millions of US dollars) Assets 31-December -20204 Current assets: Cash and cash equivalents 3,935.6 Marketable securities Accounts and notes receivable, net of allowance 812.84e Hiffmax Financial receivables, net 2,049.7ce Inventoriese 1,068.86 Other current assets 505.64e Assets held for sale 1,867.84e Total current assets 11,072.34 Non-current assets: Hiffmax Financial receivable, net 2,129.5 Property, plant and equipment, net 3,623.74 Goodwill and intangible assets, nete 586.74 Deferred income tax assets 2,789.46 Other non-current assets 5,781.4 Total non-current assets 14910.74 Total assets 25,983 2,337.84 2,689.34 2,597.5 7.34 7314 8,3636 Liabilities Current liabilities: Accounts payable Short-term debt and current portion of long-term debt Accrued liabilities Other current liabilities Liabilities held for sale Total current liabilities Non-current liabilities: Long-term debte Post retirement benefits other than pensions Pension liabilities Other non-current liabilities Total non-current liabilities Total liabilities Shareholders' equity: Common stock, $0.01 par (Note 1) Preferred stock, $1 par (Note 2) Additional paid-in capital Less: Cost of treasury stocke Retained earnings Total shareholders' equity Total liabilities and equity 6,736.3ce 593.34 1,375.4 1,452.24e 10,157.24 18,520.14 2.2ce 50e 5,135.74e -3404e 2,615 7,462.94e 25.983 Hiffmax Motor Company (Draft copy) Consolidated Income Statement For the Year Ended December 31, 2020- (In millions of US dollars) 2020 Net sales and revenue Automotive Hiffmax Financial Total net sales and revenue $13,3574 1,216 14,5724 Costs and expenses Automotive cost of sales Hiffmax Financial interest, operating and other expenses Automotive selling, general and administrative expense Total costs and expenses Operating income Automotive interest expense Other income- Income from continuing operations before income taxes Income tax expensee Income from continuing operations after income taxes Loss from discontinued operations: Loss from discontinued operations, before income taxe Loss from discontinued operations, after income taxes Net income 11,359 1,1444 926e 13,428 1,144ce 58.84e 90.24 1,175 246.8 9294 -3.524e -2.78e 925.8 Note 1: Hiffmax had 150 million outstanding common shares with $0.01 par value, as of January 1, 2020. Note 2: During the year, for the first time, Hiffmax issued 50 million, cumulative, nonconvertible, preferred $1 par value shares at $20 each, 6% dividend. Preferred dividends have not been declared for the year 2020.- 832 Appendix 1 - (Draft Copy) Statement of Financial Position (In millions of US dollars) Assets 31-December -20204 Current assets: Cash and cash equivalents 3,935.6 Marketable securities Accounts and notes receivable, net of allowance 812.84e Hiffmax Financial receivables, net 2,049.7ce Inventoriese 1,068.86 Other current assets 505.64e Assets held for sale 1,867.84e Total current assets 11,072.34 Non-current assets: Hiffmax Financial receivable, net 2,129.5 Property, plant and equipment, net 3,623.74 Goodwill and intangible assets, nete 586.74 Deferred income tax assets 2,789.46 Other non-current assets 5,781.4 Total non-current assets 14910.74 Total assets 25,983 2,337.84 2,689.34 2,597.5 7.34 7314 8,3636 Liabilities Current liabilities: Accounts payable Short-term debt and current portion of long-term debt Accrued liabilities Other current liabilities Liabilities held for sale Total current liabilities Non-current liabilities: Long-term debte Post retirement benefits other than pensions Pension liabilities Other non-current liabilities Total non-current liabilities Total liabilities Shareholders' equity: Common stock, $0.01 par (Note 1) Preferred stock, $1 par (Note 2) Additional paid-in capital Less: Cost of treasury stocke Retained earnings Total shareholders' equity Total liabilities and equity 6,736.3ce 593.34 1,375.4 1,452.24e 10,157.24 18,520.14 2.2ce 50e 5,135.74e -3404e 2,615 7,462.94e 25.983 Hiffmax Motor Company (Draft copy) Consolidated Income Statement For the Year Ended December 31, 2020- (In millions of US dollars) 2020 Net sales and revenue Automotive Hiffmax Financial Total net sales and revenue $13,3574 1,216 14,5724 Costs and expenses Automotive cost of sales Hiffmax Financial interest, operating and other expenses Automotive selling, general and administrative expense Total costs and expenses Operating income Automotive interest expense Other income- Income from continuing operations before income taxes Income tax expensee Income from continuing operations after income taxes Loss from discontinued operations: Loss from discontinued operations, before income taxe Loss from discontinued operations, after income taxes Net income 11,359 1,1444 926e 13,428 1,144ce 58.84e 90.24 1,175 246.8 9294 -3.524e -2.78e 925.8 Note 1: Hiffmax had 150 million outstanding common shares with $0.01 par value, as of January 1, 2020. Note 2: During the year, for the first time, Hiffmax issued 50 million, cumulative, nonconvertible, preferred $1 par value shares at $20 each, 6% dividend. Preferred dividends have not been declared for the year 2020