On January 1, 2018, Toque Inc., a Canadian company, acquired 80% of the outstanding shares of Tam plc, a Scottish company, for consideration of 1,800,000. On that date, Tam plc had share capital of 1,100,000 and retained earnings of 800,000. All its assets and liabilities had values corresponding to their book values except that inventories were overvalued by 100,000 and capital assets (with a remaining useful life of six years) were undervalued by 300,000. Toque Inc. used the cost method to account for its investment in Tam plc and values the noncontrolling interest in Tam plc in its consolidated financial statements at its fair value proportionate to the price paid for its controlling interest (i.e., fair value enterprise method). Goodwill arising from the purchase is assessed for impairment each year and no impairment was determined to have occurred in 2018 but impairment of 30,000 was considered to have occurred in 2019. The financial statements of Tam plc for the years ended December 31, 2019 and 2018 were as follows: TAM PIC Statements of Financial Position as at December 31, 2019 and 2018 (in ) 2019 2018 Cash 60,000 295,000 Accounts receivable 330,000 250,000 Inventories 680,000 530,000 Capital assets (net) 2,150,000 1,500,000 3,220,000 2,575,000 Current liabilities 90,000 75,000 Long-term debt 1,000,000 500,000 Common shares 1,100,000 1,100,000 Retained earninngs 1,030,000 900,000 3,220,000 2,575,000 TAM PIC STATEMENT OF INCOME AND RETAINED EARNINGS for the year ended December 31, 2019 (in ) Sales 4,400,000 Cost of sales 3,200,000 Gross profit 1,200,000 Selling and administrative expenses 400,000 Interest expense 65,000 Amortization expense 350,000 income tax expense 155,000 Net income 230,000 Retained earnings, January 1, 2019 900,000 Dividends declared (100,000) Retained earnings, December 31, 2019 1,030,000 The capital assets on hand at January 1, 2018, had been acquired on January 1, 2014 and were being amortized on a straight-line basis over their estimated useful lives of ten years with no estimated residual value. Additional capital assets were acquired on July 1, 2019 at a cost of 1,000,000 which was financed in part through a bond issue of 500,000 at an effective interest rate of 10% (issued on July 1, 2019 and repayable on June 30, 2024). (The other long-term debt was a ten-year bond at 8% interest issued at the formation of the company on January 1, 2013.) The new assets also had an estimated useful life of ten years. Sales, inventory purchases, and selling and administrative costs were incurred evenly through the year. Ending inventory for each year was purchased on November 1 of that year. Tam declared and paid its dividends on September 30 each year. Toque Inc. had net income of $250,000 for 2018 and paid dividends of $160,000 on July 1 of that year. Exchange rates for the period from January 1, 2013 to December 31, 2019 were as follows: 1.00 Can$1.50 1.00-Can$1.53 1.00 = Can$1.60 1.00 = Can$1.62 January 1, 2013 January 1, 2014 January 1, 2018 July 1, 2018 September 30, 2018 1.00 Can$1.63 November 1, 2018 Average for 2018 1.00 1.00 Can$1.64 Can$1.625 December 31, 2018/January 1, 2019 July, 1, 2019 September 30, 2019 1.00 = Can$1.65 1.00 = Can$1.67 1.00-Can$1.68 November 1, 2019 1.00 = Can$1.69 Average for July to December 2019 1.00-Can$1.685 Average for 2019 1.00 Can$1.675 1.00- Can$1.70 Required: December 31, 2019 (a) Calculate the exchange gain or loss that Tam plc would report for 2019 if it was considered to be an integrated foreign operation (and used the functional currency method in translating its financial statements). (b) Calculate the amounts that would appear in the translated financial statements of Tam plc for 2019 if it was considered to be an integrated foreign operation (and used the functional currency method in translating its financial statements). i) Cost of goods sold ii) Capital assets (net) iii) Long-term debt iv) Common shares (c) If Tam plc was considered to be a self-sustaining foreign subsidiary (and used the presentation currency method of translation) and neither Toque Inc. nor Tam plc had any other comprehensive income in their single company financial statements for 2019: i) How much would Toque report as consolidated other comprehensive income for 2019? ii) How much would consolidated accumulated other comprehensive income increase or decrease from December 31, 2018, to December 31, 2019? On January 1, 2018, Toque Inc., a Canadian company, acquired 80% of the outstanding shares of Tam plc, a Scottish company, for consideration of 1,800,000. On that date, Tam plc had share capital of 1,100,000 and retained earnings of 800,000. All its assets and liabilities had values corresponding to their book values except that inventories were overvalued by 100,000 and capital assets (with a remaining useful life of six years) were undervalued by 300,000. Toque Inc. used the cost method to account for its investment in Tam plc and values the noncontrolling interest in Tam plc in its consolidated financial statements at its fair value proportionate to the price paid for its controlling interest (i.e., fair value enterprise method). Goodwill arising from the purchase is assessed for impairment each year and no impairment was determined to have occurred in 2018 but impairment of 30,000 was considered to have occurred in 2019. The financial statements of Tam plc for the years ended December 31, 2019 and 2018 were as follows: TAM PIC Statements of Financial Position as at December 31, 2019 and 2018 (in ) 2019 2018 Cash 60,000 295,000 Accounts receivable 330,000 250,000 Inventories 680,000 530,000 Capital assets (net) 2,150,000 1,500,000 3,220,000 2,575,000 Current liabilities 90,000 75,000 Long-term debt. 1,000,000 500,000 Common shares 1,100,000 1,100,000 Retained earnings 1,030,000 900,000 3,220,000 2,575,000 TAM PLC STATEMENT OF INCOME AND RETAINED EARNINGS for the year ended December 31, 2019 (in ) Sales 4,400,000 Cost of sales 3,200,000 Gross profit 1,200,000 Selling and administrative expenses 400,000 Interest expense 65,000 Amortization expense 350,000 income tax expense 155,000 Net income 230,000 Retained earnings, January 1, 2019 900,000 Dividends declared (100,000) Retained earnings, December 31, 2019 1,030,000 The capital assets on hand at January 1, 2018, had been acquired on January 1, 2014 and were being amortized on a straight-line basis over their estimated useful lives of ten years with no estimated residual value. Additional capital assets were acquired on July 1, 2019 at a cost of 1,000,000 which was financed in part through a bond issue of 500,000 at an effective interest rate of 10 % (issued on July 1, 2019 and repayable on June 30, 2024). (The other long-term debt was a ten-year bond at 8% interest issued at the formation of the company on January 1, 2013.) The new assets also had an estimated useful life of ten years. Sales, inventory purchases, and selling and administrative costs were incurred evenly through the year. Ending inventory for each year was purchased on November 1 of that year. Tam declared and paid its dividends on September 30 each year. Toque Inc. had net income of $250,000 for 2018 and paid dividends of $160,000 on July 1 of that year. Exchange rates for the period from January 1, 2013 to December 31, 2019 were as follows: January 1, 2013 1.00 Can$1.50 January 1, 2014 1.00 Can$1.53 January 1, 2018 1.00 = Can$1.60 July 1, 2018 1.00 = Can$1.62 September 30, 2018 1.00 Can$1.63 November 1, 2018 1.00 = Can$1.64 Average for 2018 1.00-Can$1.625 December 31, 2018/January 1, 2019 1.00 Can$1.65 July, 1, 2019 1.00 = Can$1.67 September 30, 2019 1.00 Can$1.68 November 1, 2019 1.00 = Can$1.69 Average for July to December 2019 1.00 Can$1.685 Average for 2019 1.00 = Can$1.675 1.00 Can$1.70 Required: December 31, 2019 (a) Calculate the exchange gain or loss that Tam plc would report for 2019 if it was considered to be an integrated foreign operation (and used the functional currency method in translating its financial statements). (b) Calculate the amounts that would appear in the translated financial statements of Tam plc for 2019 if it was considered to be an integrated foreign operation (and used the functional currency method in translating its financial statements). i) Cost of goods sold ii) Capital assets (net) iii) Long-term debt iv) Common shares (c) If Tam plc was considered to be a self-sustaining foreign subsidiary (and used the presentation currency method of translation) and neither Toque Inc. nor Tam plc had any other comprehensive income in their single company financial statements for 2019: i) How much would Toque report as consolidated other comprehensive income for 2019? ii) How much would consolidated accumulated other comprehensive income increase or decrease from December 31, 2018, to December 31, 2019