Problem 34 Translation of Financial Statements and Consolidation of a Foreign Subsidiary (Amortization of AAP)

Assume that your company owns a subsidiary operating in Canada. The subsidiary maintains its books in the Canadian dollar (CAD) as its functional currency. Following are the subsidiarys financial statements (in CAD) for the most recent year:

The relevant exchange rates for the $US value of the Canadian dollar(CAD)are as follows:

Following are financial statements for the parent:

Requirements:

a. Translate the subsidiarys income statement, statement of retained earnings, balance sheet, and statement of cashflows into $US (assume that the BOY Retained Earnings is $1,609,650).

b. Compute the ending Cumulative Translation Adjustment directly, assuming a BOY balance of $129,150. What journal entries did the parent company make as a result of this computation?

c. Assume the following information: The purchase price for the subsidiary included an AAP asset relating to a Patent that the parent estimated was worth CAD 500,000 more than its book value on the subsidiarys balance sheet. The parent is amortizing the AAP asset at a rate of CAD 50,000 per year and the BOY book value of the Patent is CAD 450,000.

Using your translated subsidiary financial statements from Part a and the parents financial data provided in Part c, prepare the consolidation spreadsheet for the year.

--This is the full question, no more info provided.

(in CAD) (in CAD) (in CAD) Income statement: Sales. ... Cost of goods sold Gross profit.. Operating expenses. Net income. 4,200,000 (2,520,000) 1,680,000 (1,092,000) 588,000 Balance sheet: Assets Cash.. Accounts receivable Inventory PPE, net 1,195,320 974,400 1,251,600 2,315,040 5,736,360 Statement of cash flows: Net income..... Change in accounts receivable Change in Inventories. Change in current liabilities Net cash from operating activities 588,000 (162,400) (208,600) 118,720 335,720 Total assets. Change in PPE, net .. Net cash from investing activities... (215,040) (215,040) Statement of retained earnings: BOY retained earnings .. 2,205,000 Net income 588,000 Dividends (58,800) Ending retained 2,734,200 earnings Liabilities and stockholders' equity Current liabilities... 712,320 Long-term liabilities 1,659,840 Common stock 280,000 APIC.. 350,000 Retained earnings 2,734,200 Total liabilities and equity ... 5,736,360 Change in long-term debt.. Dividends... Net cash from financing activities. ... 276,640 (58,800) 217,840 Net change in cash. Beginning cash Ending cash 338,520 856,800 1,195,320 BOY rate.... EOY rate.. Avg. rate.... PPE purchase date rate . . . LTD borrowing date rate... Dividend rate ... Historical rate (common stock and APIC)... $0.76 $0.82 $0.79 $0.80 $0.80 $0.81 $0.66 Balance sheet: Assets Cash Income statement: Sales.. Cost of goods sold Gross profit Equity income. Operating expenses. $17,320,000 (12,124,000) 5,196,000 425,020 (3,290,800) $ 2,330,220 Accounts receivable Inventory... Equity investment. PPE, net $ 2,262,386 2,216,960 3,360,080 3,086,644 17,895,024 $28,821,094 Net income. Statement of retained earnings: BOY retained earnings. Net income. Dividends Ending retained earnings $13,680,410 2,330,220 (547,216) $15,463,414 $ 1,387,332 5,000,000 Liabilities and stockholders' equity Current liabilities. Long-term liabilities. Common stock APIC Retained earnings Cumulative translation adjustment.. 1,173,474 5,455,072 15,463,414 341,802 Statement of accum. comp. income: BOY cumulative translation adjustment Current-year translation gain (loss) EOY cumulative translation adjustment 129,150 212,652 $28,821,094 341,802 (in CAD) (in CAD) (in CAD) Income statement: Sales. ... Cost of goods sold Gross profit.. Operating expenses. Net income. 4,200,000 (2,520,000) 1,680,000 (1,092,000) 588,000 Balance sheet: Assets Cash.. Accounts receivable Inventory PPE, net 1,195,320 974,400 1,251,600 2,315,040 5,736,360 Statement of cash flows: Net income..... Change in accounts receivable Change in Inventories. Change in current liabilities Net cash from operating activities 588,000 (162,400) (208,600) 118,720 335,720 Total assets. Change in PPE, net .. Net cash from investing activities... (215,040) (215,040) Statement of retained earnings: BOY retained earnings .. 2,205,000 Net income 588,000 Dividends (58,800) Ending retained 2,734,200 earnings Liabilities and stockholders' equity Current liabilities... 712,320 Long-term liabilities 1,659,840 Common stock 280,000 APIC.. 350,000 Retained earnings 2,734,200 Total liabilities and equity ... 5,736,360 Change in long-term debt.. Dividends... Net cash from financing activities. ... 276,640 (58,800) 217,840 Net change in cash. Beginning cash Ending cash 338,520 856,800 1,195,320 BOY rate.... EOY rate.. Avg. rate.... PPE purchase date rate . . . LTD borrowing date rate... Dividend rate ... Historical rate (common stock and APIC)... $0.76 $0.82 $0.79 $0.80 $0.80 $0.81 $0.66 Balance sheet: Assets Cash Income statement: Sales.. Cost of goods sold Gross profit Equity income. Operating expenses. $17,320,000 (12,124,000) 5,196,000 425,020 (3,290,800) $ 2,330,220 Accounts receivable Inventory... Equity investment. PPE, net $ 2,262,386 2,216,960 3,360,080 3,086,644 17,895,024 $28,821,094 Net income. Statement of retained earnings: BOY retained earnings. Net income. Dividends Ending retained earnings $13,680,410 2,330,220 (547,216) $15,463,414 $ 1,387,332 5,000,000 Liabilities and stockholders' equity Current liabilities. Long-term liabilities. Common stock APIC Retained earnings Cumulative translation adjustment.. 1,173,474 5,455,072 15,463,414 341,802 Statement of accum. comp. income: BOY cumulative translation adjustment Current-year translation gain (loss) EOY cumulative translation adjustment 129,150 212,652 $28,821,094 341,802