On January 1, 20X1, Par Company purchased all the outstanding stock of South Bay Company, located in Canada, for $129,600. On January 1, 20X1, the direct exchange rate for the Canadian dollar (C$) was C$1 = $0.81. South Bay's book value on January 1, 20X1, was C$91,000. The fair value of South Bay's plant and equipment was C$9,700 more than book value, and the plant and equipment are being depreciated over 10 years with no salvage value. The remainder of the differential is attributable to a trademark, which will be amortized over 10 years. During 20X1, South Bay earned C$30,000 in income and declared and paid C$8,500 in dividends. The dividends were declared and paid in Canadian dollars when the exchange rate was C$1 = $0.75. On December 31, 20X1, Par continues to hold the Canadian currency received from the dividend. On December 31, 20X1, the direct exchange rate is C$1 = $0.64. The average exchange rate during 20X1 was C$1 $0.76. Management has determined that the Canadian dollar is South Bay's appropriate functional currency. Required: a. Prepare a schedule showing the differential allocation and amortization for 20X1. The schedule should present both Canadian dollars and U.S. dollars. (Amounts to be deducted should be entered with decimal places and rest of answers to nearest whole dollar.) minus sign. Round "Exchange Rate" answers to 2 Answer is complete and correct. Canadian Dollars Exchange Rate U.S. Dollars $ 129,600 Investment cost C 160,000 0.81 Book value 20X1 Differential investment on January 1, 91,000 73,710 0.81 C 69,000 55,890 Answer is complete but not entirely correct Exchange Rate Canadian Dollars U.S. Dollars Plant and Plant and Trademark Trademark equipment equipment Income Statement: Differential at date of acquisition: 9,700 C C 35,000 0.81 7,857 28,350 Amortization this period: (10 years) (6,900)x 0.76 (737) (970) (5,244) 8,730 S 28,100 Remaining balance: S 7,120 C C 23,106 Balance Sheet: Remaining balance on 12/31/X1 translated at year-end exchange rates 0.64 S 8,730 28.100 C C 5.587 17,984 Difference to OC-translation adjustment: 1.533 5.122 b. Par uses the fully adjusted equity method to account for its investment. Provide the entries that it would record in 20X1 for its investment in South Bay for the following items: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dol lar.) Answer is not complete. No Credit Event General Journal Debit Investment in South Bay Company 129,600 1 Cash 129,600 B 2 Investment in South Bay Company 22,800 Income from South Bay Company 22,800 Foreign currency units (C$) C 23 6,375 Investment in South Bay Company 6,375 Income from South Bay Company D Investment in South Bay Company E 5 Other comprehensive income Translation adjustment Income from South Bay Company c. Prepare a schedule showing the proof of the translation adjustment for South Bay as a result of the translation of the subsidiary's accounts from Canadian dollars to U.S. dollars. Then provide the entry that Par would record for its share of the translation adjustment resulting from the translation of the subsidiary's accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Amounts to be deducted should be entered with a minus sign. Round "Exchange Rate" answers to 2 decimal places and rest of answers to nearest whole dollar.) Answer is not complete. PAR COMPANY AND SUBSIDIARY Proof of Translation Adjustment Year Ended December 31, 20X1 Canadian U.S Exchange Rate Dollars Dollars Net assets at beginning of year, 1/1/X1 Adjustment for changes in assets position during year: Net income for year C Dividends paid Net assets translated at rates in effect for those items Net assets at end of year Change in other comprehensive income translation adjustment during year net decrease (debit) S C 0 Answer is not complete. General Journal No Event Debit Credit d. Provide the entry required by Par to restate the C$8,500 in the Foreign Currency Units account into its year-end U.S. dollar- equivalent value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollar.) Answer is not complete Credit No Event General Journal Debit On January 1, 20X1, Par Company purchased all the outstanding stock of South Bay Company, located in Canada, for $129,600. On January 1, 20X1, the direct exchange rate for the Canadian dollar (C$) was C$1 = $0.81. South Bay's book value on January 1, 20X1, was C$91,000. The fair value of South Bay's plant and equipment was C$9,700 more than book value, and the plant and equipment are being depreciated over 10 years with no salvage value. The remainder of the differential is attributable to a trademark, which will be amortized over 10 years. During 20X1, South Bay earned C$30,000 in income and declared and paid C$8,500 in dividends. The dividends were declared and paid in Canadian dollars when the exchange rate was C$1 = $0.75. On December 31, 20X1, Par continues to hold the Canadian currency received from the dividend. On December 31, 20X1, the direct exchange rate is C$1 = $0.64. The average exchange rate during 20X1 was C$1 $0.76. Management has determined that the Canadian dollar is South Bay's appropriate functional currency. Required: a. Prepare a schedule showing the differential allocation and amortization for 20X1. The schedule should present both Canadian dollars and U.S. dollars. (Amounts to be deducted should be entered with decimal places and rest of answers to nearest whole dollar.) minus sign. Round "Exchange Rate" answers to 2 Answer is complete and correct. Canadian Dollars Exchange Rate U.S. Dollars $ 129,600 Investment cost C 160,000 0.81 Book value 20X1 Differential investment on January 1, 91,000 73,710 0.81 C 69,000 55,890 Answer is complete but not entirely correct Exchange Rate Canadian Dollars U.S. Dollars Plant and Plant and Trademark Trademark equipment equipment Income Statement: Differential at date of acquisition: 9,700 C C 35,000 0.81 7,857 28,350 Amortization this period: (10 years) (6,900)x 0.76 (737) (970) (5,244) 8,730 S 28,100 Remaining balance: S 7,120 C C 23,106 Balance Sheet: Remaining balance on 12/31/X1 translated at year-end exchange rates 0.64 S 8,730 28.100 C C 5.587 17,984 Difference to OC-translation adjustment: 1.533 5.122 b. Par uses the fully adjusted equity method to account for its investment. Provide the entries that it would record in 20X1 for its investment in South Bay for the following items: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dol lar.) Answer is not complete. No Credit Event General Journal Debit Investment in South Bay Company 129,600 1 Cash 129,600 B 2 Investment in South Bay Company 22,800 Income from South Bay Company 22,800 Foreign currency units (C$) C 23 6,375 Investment in South Bay Company 6,375 Income from South Bay Company D Investment in South Bay Company E 5 Other comprehensive income Translation adjustment Income from South Bay Company c. Prepare a schedule showing the proof of the translation adjustment for South Bay as a result of the translation of the subsidiary's accounts from Canadian dollars to U.S. dollars. Then provide the entry that Par would record for its share of the translation adjustment resulting from the translation of the subsidiary's accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Amounts to be deducted should be entered with a minus sign. Round "Exchange Rate" answers to 2 decimal places and rest of answers to nearest whole dollar.) Answer is not complete. PAR COMPANY AND SUBSIDIARY Proof of Translation Adjustment Year Ended December 31, 20X1 Canadian U.S Exchange Rate Dollars Dollars Net assets at beginning of year, 1/1/X1 Adjustment for changes in assets position during year: Net income for year C Dividends paid Net assets translated at rates in effect for those items Net assets at end of year Change in other comprehensive income translation adjustment during year net decrease (debit) S C 0 Answer is not complete. General Journal No Event Debit Credit d. Provide the entry required by Par to restate the C$8,500 in the Foreign Currency Units account into its year-end U.S. dollar- equivalent value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollar.) Answer is not complete Credit No Event General Journal Debit