Question 3: (32 marks) On January 1, Year 2, Par Corporation of Canada paid FCU 7.0 million for 64% of the outstanding common shares of Sub Company of Sweden. On this date the fair values of Sub's identifiable assets and liabilities were equal to their carrying values. Sub's comparative balance sheets and Year 2 income statement are as follows: Sub Balance Sheet December 31 Other information: Exchange rates: Last quarter of Year 1 average FCU 1 = $2.10 January 1, Year 2 FCU 1 = $2.00 October 31, Year 2 FCU 1 = $1.80 Last quarter of Year 2 average FCU 1 = $1.77 Average for Year 2 FCU 1 = $1.82 December 31, Year 2 FCU 1 - $1.60 Sub Company declared and paid dividends totaling FCU 190,000 on October 31, Year 2. Sub purchased opening and ending inventory evenly over the 4th quarter of Year 1 and Year 2, respectively. Cash, Accounts Receivable Inventory Year 2 FCU 7,590,000 1.830,000 4,790,000 FCU 14,210,000 Year 1 FCU 4,400,000 2.200.000 5,290,000 FCU 11,890,000 Plant and equipment (net) Accounts payable Note payable Common shares Retained earnings FCU 1,500,000 3,900,000 4,000,000 4.810,000 FCU 14,210,000 FCU 1,590,000 3.000.000 4,000,000 3.300.000 FCU 11,890,000 REQUIRED: Show ALL calculations for FULL marks. Round to the nearest dollar Part A. Assume self-sustaining relationship (functional currency is FCU). i) Calculate the translated comprehensive income. 4.5 marks ii) How much goodwill would appear on the consolidated balance sheet at December 31, Year 2? Assume there was a goodwill impairment loss of FCU 1,000,000 in Year 2 relating to the AD schedule. Hint: prepare the calculation for the exchange gain loss on the translation of goodwill that would be included in accumulated other comprehensive income. 4 marks Sales Cost of Goods sold Depreciation expense Other expense Interest expense Net income Sut Income Statement For the year ended December 31, Year 2 FCU 9,600,000 5,700,000 500.000 1,300,000 400,000 FCU 1.700,000 iii) Prepare account balances for the liabilities and shareholders' equity portion of the consolidated balance sheet at December 31, Year 2. Your answer should include a detailed calculation of consolidated RE, accumulated other comprehensive income and noncontrolling interest. 10.5 mar Following is the Balance Sheet of Par at December 31, Year 2: Part B. Ignore your answers above and now assume an integrated relationship (1.e. functional currency is Canadian dollars). Prepare the translated income statement for Year 2. Hint: Translated NI = $2,065,100.13 marks Cash, Accounts Receivable Inventory Goodwili Plant and equipment (net) PAR $ 1,000,000 850.000 50.000 2,000,000 $ 3,900,000 Accounts payable Note payable Common shares Retained earnings $ 200,000 900,000 1,500,000 1,300,000 $ 3,900,000 Question 3: (32 marks) On January 1, Year 2, Par Corporation of Canada paid FCU 7.0 million for 64% of the outstanding common shares of Sub Company of Sweden. On this date the fair values of Sub's identifiable assets and liabilities were equal to their carrying values. Sub's comparative balance sheets and Year 2 income statement are as follows: Sub Balance Sheet December 31 Other information: Exchange rates: Last quarter of Year 1 average FCU 1 = $2.10 January 1, Year 2 FCU 1 = $2.00 October 31, Year 2 FCU 1 = $1.80 Last quarter of Year 2 average FCU 1 = $1.77 Average for Year 2 FCU 1 = $1.82 December 31, Year 2 FCU 1 - $1.60 Sub Company declared and paid dividends totaling FCU 190,000 on October 31, Year 2. Sub purchased opening and ending inventory evenly over the 4th quarter of Year 1 and Year 2, respectively. Cash, Accounts Receivable Inventory Year 2 FCU 7,590,000 1.830,000 4,790,000 FCU 14,210,000 Year 1 FCU 4,400,000 2.200.000 5,290,000 FCU 11,890,000 Plant and equipment (net) Accounts payable Note payable Common shares Retained earnings FCU 1,500,000 3,900,000 4,000,000 4.810,000 FCU 14,210,000 FCU 1,590,000 3.000.000 4,000,000 3.300.000 FCU 11,890,000 REQUIRED: Show ALL calculations for FULL marks. Round to the nearest dollar Part A. Assume self-sustaining relationship (functional currency is FCU). i) Calculate the translated comprehensive income. 4.5 marks ii) How much goodwill would appear on the consolidated balance sheet at December 31, Year 2? Assume there was a goodwill impairment loss of FCU 1,000,000 in Year 2 relating to the AD schedule. Hint: prepare the calculation for the exchange gain loss on the translation of goodwill that would be included in accumulated other comprehensive income. 4 marks Sales Cost of Goods sold Depreciation expense Other expense Interest expense Net income Sut Income Statement For the year ended December 31, Year 2 FCU 9,600,000 5,700,000 500.000 1,300,000 400,000 FCU 1.700,000 iii) Prepare account balances for the liabilities and shareholders' equity portion of the consolidated balance sheet at December 31, Year 2. Your answer should include a detailed calculation of consolidated RE, accumulated other comprehensive income and noncontrolling interest. 10.5 mar Following is the Balance Sheet of Par at December 31, Year 2: Part B. Ignore your answers above and now assume an integrated relationship (1.e. functional currency is Canadian dollars). Prepare the translated income statement for Year 2. Hint: Translated NI = $2,065,100.13 marks Cash, Accounts Receivable Inventory Goodwili Plant and equipment (net) PAR $ 1,000,000 850.000 50.000 2,000,000 $ 3,900,000 Accounts payable Note payable Common shares Retained earnings $ 200,000 900,000 1,500,000 1,300,000 $ 3,900,000