On January 1, Year 2, P Ltd paid $900,000 for 100% of the outstanding shares of S Ltd., a foreign subsidiary. On the date of acquisition, Ss fair values approximated its book values. Both companies have December 31 year-end.

Ss financial statements for Year 7 are shown below:

Balance Sheet

As at December 31, Year 7 (in FC)

Current Monetary Assets 820,000

Inventory 300,000

Plant and Equipment (Net) 1,100,000

Total Assets 2,220,000

Current Liabilities 300,000

Deferred Income Taxes 90,000

Bonds Payable (due Dec 31, Year 25) 400,000

Common Stock 300,000

Retained Earnings 1,130,000

Total Liabilities and Equity 2,220,000

Income Statement

For the Year Ended December 31, Year 7 (in FC)

Sales 900,000

Inventory, January 1, Year 7 200,000

Purchases 600,000

Inventory, December 31, Year 7 (300,000)

Depreciation Expense 100,000

Other Expenses 200,000

800,000

Net Income 100,000

Other information:

S declared FC 110,000 in dividends on September 30, Year 7 when the exchange rate was 1FC=1.115 CDN; S paid the dividends on Dec 31, year 7 when the exchange rate 1FC=1.1 CDN.

The inventories on hand at the end of year 7 were purchased when the exchange rate was 1FC = $1.12 CDN;

The inventories on hand at the end of Year 6 were purchased when the exchange rate was 1FC = $1.11 CDN;

All Plant and Equipment were purchased on January 6, Year 4 when exchange rate was 1FC = $1.15 CDN;

Balance of Net Monetary Assets on December 31, Year 6 was 40,000FC

Balance of Net Assets on Dec 31, Year 6 was 1,440,000 FC

Other Exchange Rates:

January 1, Year 2 (date of acquisition): 1FC = $1.20 CDN

December 31, Year 6: 1FC = $1.13 CDN

January 1, year 7: 1FC = $1.13 CDN

December 31, year 7: 1FC = $1.10 CDN

Average for year 7: 1FC = $1.125 CDN

Translate the following account balances of S on December 31, Year 7 using the PCT & FCT methods: (3 marks each)

DO NOT use commas. eg 100000 not 100,000

Answer the following: 1. FCT method: Depreciation Expense