Problem 11-3 LO3, 4, 6 On December 31, Year 1, Kelly Corporation of Toronto paid 13.7 million Libyan dinars (LD) for 100% of the outstanding common shares of Arkenu Company of Libya. On this date, the fair values of Arkenu's identifiable assets and liabilities were equal to their carrying amounts. Arkenu's comparative balance sheets and Year 2 income statement are as follows: BALANCE SHEET At December 31 Year 2 Year 1 Current monetary assets LD11,361,000 LD 9,670,000 Inventory 1,898,000 2,421,000 Plant and equipment (net) 6,957,000 7,363,000 LD20,216,000 LD19.454,000 Current monetary liabilities LD 2,005,000 LD 2,433,000 Bonds payable, due Dec. 31, Year 6 4,870,000 4,870,000 Common shares 5,070,000 5,070,000 Retained earnings 8,271,000 7,081,000 LD20,216,000 LD19,454,000 INCOME STATEMENT For the year ended December 31, Year 2 Sales LD16,206,000 Inventory, Jan. 1 2,421,000 Purchases 10,938,000 Inventory, Dec. 31 (1,898,000) Depreciation expense 406,000 Other expenses 1,598,000 13,465,000 Net income LD 2,741,000 Page 742