Problem 2 (60 marks) On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired 90% of Marcus Co. (MC), a foreign company for FC 623,200. At the acquisition date, the carrying value of MCs net assets equaled their fair value except for the equipment, which had a carrying value of FC 800,000 and a fair value of FC 880,000. At the acquisition date, MCs equipment had a remaining useful life of 10 years. There was an FC 4,000 impairment of the goodwill which occurred evenly throughout 20X8.

Required:

On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired 90% of Marcus Co. (MC), a foreign company for FC 623,200. At the acquisition date, the carrying value of MCs net assets equaled their fair value except for the equipment, which had a carrying value of FC 800,000 and a fair value of FC 880,000. At the acquisition date, MCs equipment had a remaining useful life of 10 years. There was an FC 4,000 impairment of the goodwill which occurred evenly throughout 20X8.Prepare consolidated financial statements at December 31, 20X8 under each of the following assumptions:

i) the functional currency is $CAD, and ii) the functional currency is the FC.

Assume that LL is a private company and reports under ASPE. LL uses the equity method to report its investment in MC. LLs functional currency is $CAD. Calculate LLs Investment in Marcus Co.s account at December 31, 20X8. There is no need to prepare financial statements.