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Posted on Jul 10, 2024

Question 4. (25 marks) On January 1, Year 12. Par Corporation of Canada paid FCU 8,200,000 for 85% of the outstanding common shares of Sub

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Question 4. (25 marks) On January 1, Year 12. Par Corporation of Canada paid FCU 8,200,000 for 85% of the outstanding common shares of Sub Company of France. Sub's comparative balance sheets and Year 12 income statement are as follows: Cash Accounts Receivable Inventory Plant and equipment (net) Balance Sheet December 31 Year 12 FCU 12,020,000 1,790,000 4,590,000 FCU 18.400.000 Year 11 FCU 7,000,000 2,200,000 5,290,000 FCU 14,490,000 Accounts payable Note payable Common shares Retained earnings FCU 2,500,000 4,200,000 5,200,000 6,500,000 FCU 18.400.000 FCU 1,590,000 3,900,000 5,200,000 3.800.000 FCU 14.490.000 Income Statement For the year ended December 31, Year 12 Sales Cost of Goods sold Depreciation expense Other expense Interest expense Net income FCU 15.200.000 7,700,000 700,000 2,500,000 600.000 FCU 3.700.000 Other information: Exchange rates: January 1, Year 12 August 30, Year 12 November 30, Year 12 December 31, Year 12 Average for Year 12 FCU 1 = $0.80 FCU 1 = $0.77 FCU 1 = $0.75 FCU 1 = $0.72 FCU 1 = $0.74 Sub Company declared and paid dividends totaling FCU 1,000,000 on August 30, Year 12. The inventories on hand on January 1, Year 12 were purchased over the previous 3 months when the average exchange rate was FCU 1 = $0.85. The inventories on hand on December 31, Year 12 was purchased on November 30 Year 12. REQUIRED: Part A: Sub is an integrated (functional Currency is the Canadian dollar) foreign subsidiary. (13.5 marks) (a) Calculate the Year 2 exchange gain or loss that would result from the translation of Sub's financial statements (7.5 marks) (6) Prepare a translated Income Statement (6 marks) Part B: Sub is a self-sustaining (functional Currency is the FCU) foreign subsidiary. (11.5 marks) (a) Calculate the translated Comprehensive Income for Year 12. (5 marks) (6) Calculate the foreign exchange gain or loss on the translation of acquisition differential (AD) schedule assuming that all of the AD goes to machinery with a useful of 7 years. What is the amount of the machinery FVI that would appear on the December 31, Year 2, consolidated balance sheet? (5 marks) (c) Calculate the total amount of Accumulated Other Comprehensive income that would appear on Par's Year 12 Consolidated Balance Sheet. (1.5 marks) Question 4. (25 marks) On January 1, Year 12. Par Corporation of Canada paid FCU 8,200,000 for 85% of the outstanding common shares of Sub Company of France. Sub's comparative balance sheets and Year 12 income statement are as follows: Cash Accounts Receivable Inventory Plant and equipment (net) Balance Sheet December 31 Year 12 FCU 12,020,000 1,790,000 4,590,000 FCU 18.400.000 Year 11 FCU 7,000,000 2,200,000 5,290,000 FCU 14,490,000 Accounts payable Note payable Common shares Retained earnings FCU 2,500,000 4,200,000 5,200,000 6,500,000 FCU 18.400.000 FCU 1,590,000 3,900,000 5,200,000 3.800.000 FCU 14.490.000 Income Statement For the year ended December 31, Year 12 Sales Cost of Goods sold Depreciation expense Other expense Interest expense Net income FCU 15.200.000 7,700,000 700,000 2,500,000 600.000 FCU 3.700.000 Other information: Exchange rates: January 1, Year 12 August 30, Year 12 November 30, Year 12 December 31, Year 12 Average for Year 12 FCU 1 = $0.80 FCU 1 = $0.77 FCU 1 = $0.75 FCU 1 = $0.72 FCU 1 = $0.74 Sub Company declared and paid dividends totaling FCU 1,000,000 on August 30, Year 12. The inventories on hand on January 1, Year 12 were purchased over the previous 3 months when the average exchange rate was FCU 1 = $0.85. The inventories on hand on December 31, Year 12 was purchased on November 30 Year 12. REQUIRED: Part A: Sub is an integrated (functional Currency is the Canadian dollar) foreign subsidiary. (13.5 marks) (a) Calculate the Year 2 exchange gain or loss that would result from the translation of Sub's financial statements (7.5 marks) (6) Prepare a translated Income Statement (6 marks) Part B: Sub is a self-sustaining (functional Currency is the FCU) foreign subsidiary. (11.5 marks) (a) Calculate the translated Comprehensive Income for Year 12. (5 marks) (6) Calculate the foreign exchange gain or loss on the translation of acquisition differential (AD) schedule assuming that all of the AD goes to machinery with a useful of 7 years. What is the amount of the machinery FVI that would appear on the December 31, Year 2, consolidated balance sheet? (5 marks) (c) Calculate the total amount of Accumulated Other Comprehensive income that would appear on Par's Year 12 Consolidated Balance Sheet. (1.5 marks)