On January 1, 2020, Larmer Corp. (a Canadian company) purchased 80% of Martin Inc, an

American company, for US$50,000.

Martin's book values approximated its fair values on that date except for plant and equipment,

which had a fair value of US$30,000 with a remaining life expectancy of 5 years. A goodwill

impairment loss of US$1,000 occurred during 2020. Martin's January 1, 2020 Balance Sheet is

shown below (in U.S. dollars):

Current Monetary Assets $50,000

Inventory $40,000

Plant and Equipment $25,000

Total Assets $115,000

Current Liabilities $45,000

Bonds Payable (maturity: January 1, 2026) $20,000

Common Shares $30,000

Retained Earnings $20,000

Total Liabilities and Equity $115,000

The following exchange rates were in effect during 2020:

January 1, 2020: US $1 = CDN $1.3250

Average for 2020: US $1 = CDN $1.3350

Date when Ending Inventory Purchased: US $1 = CDN $1.34

December 31, 2020: US $1 = CDN $1.35

Sales, purchases and other expenses occurred evenly throughout the year.

Dividends declared and paid December 31, 2020.

The financial statements of Larmer (in Canadian dollars) and Martin (in U.S. dollars) are shown

below:

Balance Sheets

Larmer Martin

Current Monetary Assets $42,050 $65,000

Inventory $60,000 $50,000

Plant and Equipment $23,500 $20,000

Investment in Martin (at Cost) $66,250

Assets $191,800 $135,000

Current Liabilities $50,000 $48,000

Bonds Payable (maturity: January 1, 2026) $35,000 $20,000

Common Shares $60,000 $30,000

Retained Earnings $30,000 $20,000

Net Income $28,800 $27,000

Dividends ($12,000) ($10,000)

Liabilities and Equity $191,800 $135,000

Income Statements Larmer Martin

Sales $80,000 $50,000

Dividend Income $10,800

Cost of Sales ($40,000) ($15,000)

Depreciation ($10,000) ($5,000)

Other expenses ($12,000) ($3,000)

Net Income $28,800 $27,000

Calculate Larmer's Consolidated Net Income for 2020 if Martin's functional currency is the U.S.

dollar (i.e., the functional currency of the foreign subsidiary is different than the parent's

functional currency).

a) Calculation of Consolidated Net Income 2020

b) Calculation of Acquisition Differential (U.S. $)