Problem 11-13

12/31/Year 1
Main buy 100% outstanding common shares of Sub

Balance Sheet
12/31/Yr2

Current monetarty asset

Inventory
Plant and Equipment (net)

Current liabilities
Bonds payable - due Dec.31, year 6
Common shares
Retained earnings

Income Statement
For the Year ended December 31, Year 2

Sales
Inventory, Jan 1
Purchases
Inventory, Dec 31
Depreciation expenses
Other expense

Net income
(a) Assume that Sub's functional currency is the Canadian dollar

(i)
Retained earning - year 1
Profits - Year 2

Retained earnings - Year 2

Dividends

Net monetary position

Balance, 12/31/Year 1
Changes - Year 2
Sales
Purchase
Other expense
Dividends
Calculated net monetary position
Actual net Monetary position
Exchange gain (loss)

Income Statement
12/31/Year 2

Sales
Cost of good sold
Depreciation expenses
Other expense
Exchange loss

Net income
 Retained earnings statement
12/31/Year 2

Balance, 1/1/Year 2
Net income

Dividends
Balance, 12/31/Year 2

Statement of Financial Position

12/31/Year 2

Current monetarty asset

Inventory
Plant and Equipment (net)

Current liabilities
Bonds payable - due Dec.31, year 6
Common shares
Retained earnings

(b) Assume that Sub's functional currency is the Bahamian dollar

Net asset, 12/31/Year 1

Net income
Dividends
Calculated Net Asset
Actual Net Asset
Other comprehensive income - Exchange loss

Income Statement
12/31/Year 2

Sales
Cost of good sold
Depreciation expenses
Other expense

Net income
Other Comprehensive income - Exchange loss
Comprehensive income

Retained Earnings Statement

12/31/Year 2

Balance, 1/1/Year 2
Net income

Dividends
Balance,12/31/Year 2

Statement of Financial Position

12/31/Year 2

Current monetarty asset

 Inventory
Plant and Equipment (net)

Current liabilities
Bonds payable - due Dec.31, year 6
Common shares
Retained earnings
Accumulated foreign exchange adjustment

iii) Impairment loss on 12/31/Year 2 B$

Investment cost
CV of Sub's net assets
Acquisition Differential
Allocated to:
Goodwill - 12/31/Year 1
Impairment loss - Year 2
Calculated Goodwill - 12/31/Year 2
Actual Goodwill - 12/31/Year 2
Exchange gain (loss)

Consolidated goodwill

iv)

Translation of financial position

Translation of Goodwill
Total Year 2 exchange loss
c) Strong solvency position for the company

Total debt
Total equity including AFEA
Total equity excluding AFEA
Debt to Equity ratio

Bahamian dollars exclude Accumulated Foreign Exchange Adj

Best return on Shareholders' equity

Net income
Comprehensive loss
Total equity including AFEA
Total equity excluding AFEA
Return on Sharehlders' equity

Bahamian dollars exclude Accumulated Foreign Exchange Adj

n shares of Sub B$ 13,400,000

Year 2
B$ 11,112,000 B$
1,856,000
6,804,000
19,772,000

1,960,000
4,840,000
5,040,000
7,932,000
19,772,000

B$ 16,122,000
2,412,000
10,896,000
(1,856,000)
532,000
2,093,000
14,077,000
2,045,000
cy is the Canadian dollar

B$ 7,084,000
2,045,000
9,129,000
7,932,000
1,197,000

B$ Exchange

2,376,000 1.92

16,122,000 1.72
(10,896,000) 1.72
(2,093,000) 1.72
(1,197,000) 1.61
4,312,000
4,312,000 1.54

B$ Exchange

16,122,000 1.72
11,452,000
532,000 1.92
2,093,000 1.72

14,077,000
2,045,000
 B$ Exchange

7,084,000 1.92
2,045,000
9,129,000
1,197,000 1.61
7,932,000

B$ Exchange

11,112,000 1.54
1,856,000 1.59
6,804,000 1.92
19,772,000

1,960,000 1.54
4,840,000 1.54
5,040,000 1.92
7,932,000
19,772,000

cy is the Bahamian dollar:

B$ Exchange

12,124,000 1.92
2,045,000 1.72
(1,197,000) 1.61
 12,972,000
12,972,000 1.54
ange loss

B$ Exchange

16,122,000 1.72
11,452,000 1.72
532,000 1.72
2,093,000 1.72
14,077,000
2,045,000 2,045,000
ange loss

B$ Exchange

7,084,000 1.92
2,045,000 1.72
9,129,000
1,197,000 1.61
7,932,000

B$ Exchange

11,112,000 1.54
 1,856,000 1.54
6,804,000 1.54
19,772,000

1,960,000 1.54
4,840,000 1.54
5,040,000 1.92
7,932,000

19,772,000

50,000

B$ Exchange

13,400,000
12,124,000
1,276,000
-
1,276,000 1.92
50,000 1.72
1,226,000
1,226,000 1.54

4,953,678
481,485
5,435,164
company
A (FCT) B1 (PCT, include)
10,461,538 10,461,538
22,664,493 19,956,923

0.46 0.52

ed Foreign Exchange Adjustment

A (FCT) B1 (PCT, include)

1,279,754
(1,427,816)
22,664,493 19,956,923

0.06 (0.07)

ed Foreign Exchange Adjustment

Year 1
9,640,000
2,412,000
7,336,000
19,388,000

2,424,000
4,840,000
5,040,000
7,084,000
19,388,000
C$

4,569,231

27,796,552
(18,786,207)
(3,608,621)
(1,930,645)
8,040,310
6,633,846
(1,406,464)

C$

27,796,552
20,478,637
1,023,077
3,608,621
1,406,464
26,516,798
1,279,754
C$

13,623,077
1,279,754
14,902,831
1,930,645
12,972,186

C$

17,095,385
2,946,032
13,084,615
33,126,032

3,015,385
7,446,154
9,692,308
12,972,186
33,126,032

C$

23,315,385
3,525,862
(1,930,645)
24,910,602
19,956,923
(4,953,678)

C$

27,796,552
19,744,828
917,241
3,608,621
24,270,690
3,525,862
(4,953,678)
(1,427,816)

C$

13,623,077
3,525,862
17,148,939
1,930,645
15,218,294

C$

17,095,385
 2,855,385
10,467,692
30,418,462

3,015,385
7,446,154
9,692,308
15,218,294
(4,953,678)
30,418,462

C$

2,453,846 4,746,154
86,207 (86,207)
2,367,639 4,659,947
1,886,154 3,720,000
(481,485) (939,947)

1,886,154
B2 (PCT, Exclude)
10,461,538

24,910,602
0.42

B2 (PCT, Exclude)
3,525,862

24,910,602
0.14
Additional Information

(1) Exchange rates

1
December 31, Year 1 $1 =
September 30, Year 2 $1 =
December 31, Year 2 $1 =
Average for Year 2 $1 =

(2) Sub declared and paid dividend on September 30, Year 2

(3) The inventories on hand on December 31, Year 2, were purch

Exchange rate B$ 1 = 0.63
Cost of good sold
B$
Inventory, 1/1/Year 2 2,412,000
Purchases 10,896,000
Inventory, 12/31/Year 2 (1,856,000)
11,452,000
 B$ 0.52 1.92
B$ 0.62 1.61
B$ 0.65 1.54
B$ 0.58 1.72

ember 30, Year 2

1, Year 2, were purchased when

1.59
Exchange C$
1.92 4,638,462 4,730,769
1.72 18,786,207 19,172,414
1.59 (2,946,032) (3,301,587)
20,478,637 20,601,596
Problem 11-13

12/31/Year 1
Main buy 100% outstanding common shares of Sub

Balance Sheet
12/31/Yr2

Current monetarty asset

Inventory
Plant and Equipment (net)

Current liabilities
Bonds payable - due Dec.31, year 6
Common shares
Retained earnings

Income Statement
For the Year ended December 31, Year 2

Sales
Inventory, Jan 1
Purchases
Inventory, Dec 31
Depreciation expenses
Other expense

Net income
(a) Assume that Sub's functional currency is the Canadian dollar

(i)
Retained earning - year 1
Profits - Year 2

Retained earnings - Year 2

Dividends

Net monetary position

Balance, 12/31/Year 1
Changes - Year 2
Sales
Purchase
Other expense
Dividends
Calculated net monetary position
Actual net Monetary position
Exchange gain (loss)

ii） Income Statement

12/31/Year 2

Sales
Cost of good sold
Depreciation expenses
Other expense
Exchange loss

Net income
 Retained earnings statement
12/31/Year 2

Balance, 1/1/Year 2
Net income

Dividends
Balance, 12/31/Year 2

Statement of Financial Position

12/31/Year 2

Current monetarty asset

Inventory
Plant and Equipment (net)

Current liabilities
Bonds payable - due Dec.31, year 6
Common shares
Retained earnings

(b) Assume that Sub's functional currency is the Bahamian dollar

i）

Net asset, 12/31/Year 1

Net income
Dividends
 Calculated Net Asset
Actual Net Asset
Other comprehensive income - Exchange loss

ii） Income Statement

12/31/Year 2

Sales
Cost of good sold
Depreciation expenses
Other expense

Net income
Other Comprehensive income - Exchange loss
Comprehensive income

Retained Earnings Statement

12/31/Year 2

Balance, 1/1/Year 2
Net income

Dividends
Balance,12/31/Year 2

Statement of Financial Position

12/31/Year 2

Current monetarty asset

 Inventory
Plant and Equipment (net)

Current liabilities
Bonds payable - due Dec.31, year 6
Common shares
Retained earnings
Accumulated foreign exchange adjustment

iii) Impairment loss on 12/31/Year 2 B$

Investment cost
CV of Sub's net assets
Acquisition Differential
Allocated to:
Goodwill - 12/31/Year 1
Impairment loss - Year 2
Calculated Goodwill - 12/31/Year 2
Actual Goodwill - 12/31/Year 2
Exchange gain (loss)

Consolidated goodwill

iv)

Translation of financial position

Translation of Goodwill
Total Year 2 exchange loss
c) Strong solvency position for the company

i） Total debt
Total equity including AFEA
Total equity excluding AFEA
Debt to Equity ratio

Bahamian dollars exclude Accumulated Foreign Exchange Adj

ii） Best return on Shareholders' equity

Net income
Comprehensive loss
Total equity including AFEA
Total equity excluding AFEA
Return on Sharehlders' equity

Bahamian dollars exclude Accumulated Foreign Exchange Adj

n shares of Sub B$ 14,900,000

Year 2
B$ 12,357,000 B$
2,066,000
7,569,000
21,992,000

2,185,000
4,990,000
5,190,000
9,627,000
21,992,000

B$ 16,572,000
2,457,000
11,106,000
(2,066,000)
202,000
796,000
12,495,000
4,077,000
cy is the Canadian dollar

B$ 7,333,000
4,077,000
11,410,000
9,627,000
1,783,000

B$ Exchange

2,295,000 1.92

16,572,000 1.72
(11,106,000) 1.72
(796,000) 1.72
(1,783,000) 1.61
5,182,000
5,182,000 1.54

B$ Exchange

16,572,000 1.72
11,497,000
202,000 1.92
796,000 1.72

12,495,000
4,077,000
 B$ Exchange

7,333,000 1.92
4,077,000
11,410,000
1,783,000 1.61
9,627,000

B$ Exchange

12,357,000 1.54
2,066,000 1.59
7,569,000 1.92
21,992,000

2,185,000 1.54
4,990,000 1.54
5,190,000 1.92
9,627,000
21,992,000

cy is the Bahamian dollar:

B$ Exchange

12,523,000 1.92
4,077,000 1.72
(1,783,000) 1.61
 14,817,000
14,817,000 1.54
ange loss

B$ Exchange

16,572,000 1.72
11,497,000 1.72
202,000 1.72
796,000 1.72
12,495,000
4,077,000 4,077,000
ange loss

B$ Exchange

7,333,000 1.92
4,077,000 1.72
11,410,000
1,783,000 1.61
9,627,000

B$ Exchange

12,357,000 1.54
 2,066,000 1.54
7,569,000 1.54
21,992,000

2,185,000 1.54
4,990,000 1.54
5,190,000 1.92
9,627,000

21,992,000

50,000

B$ Exchange

14,900,000
12,523,000
2,377,000
-
2,377,000 1.92
50,000 1.72
2,327,000
2,327,000 1.54

5,440,812
904,947
6,345,759
company
A (FCT) B1 (PCT, include)
11,038,462 11,038,462
25,807,442 22,795,385

0.43 0.48

ed Foreign Exchange Adjustment

A (FCT) B1 (PCT, include)

4,600,556
1,588,499
25,807,442 22,795,385

0.18 0.07

ed Foreign Exchange Adjustment

Year 1
9,790,000
2,457,000
7,771,000
20,018,000

2,505,000
4,990,000
5,190,000
7,333,000
20,018,000
C$

4,413,462

28,572,414
(19,148,276)
(1,372,414)
(2,875,806)
9,589,379
7,972,308
(1,617,072)

C$

28,572,414
20,593,911
388,462
1,372,414
1,617,072
23,971,858
4,600,556
C$

14,101,923
4,600,556
18,702,479
2,875,806
15,826,673

C$

19,010,769
3,279,365
14,555,769
36,845,904

3,361,538
7,676,923
9,980,769
15,826,673
36,845,904

C$

24,082,692
7,029,310
(2,875,806)
28,236,196
22,795,385
(5,440,812)

C$

28,572,414
19,822,414
348,276
1,372,414
21,543,103
7,029,310
(5,440,812)
1,588,499

C$

14,101,923
7,029,310
21,131,233
2,875,806
18,255,427

C$

19,010,769
 3,178,462
11,644,615
33,833,846

3,361,538
7,676,923
9,980,769
18,255,427
(5,440,812)
33,833,846

C$

4,571,154 4,746,154
86,207 (86,207)
4,484,947 4,659,947
3,580,000 3,720,000
(904,947) (939,947)

3,580,000
B2 (PCT, Exclude)
11,038,462

28,236,196
0.39

B2 (PCT, Exclude)
7,029,310

28,236,196
0.25
Additional Information

(1) Exchange rates

1
December 31, Year 1 $1 =
September 30, Year 2 $1 =
December 31, Year 2 $1 =
Average for Year 2 $1 =

(2) Sub declared and paid dividend on September 30, Year 2

(3) The inventories on hand on December 31, Year 2, were purch

Exchange rate B$ 1 = 0.63
Cost of good sold
B$
Inventory, 1/1/Year 2 2,457,000
Purchases 11,106,000
Inventory, 12/31/Year 2 (2,066,000)
11,497,000
 B$ 0.52 1.92
B$ 0.62 1.61
B$ 0.65 1.54
B$ 0.58 1.72

ember 30, Year 2

1, Year 2, were purchased when

1.59
Exchange C$
1.92 4,725,000 4,730,769
1.72 19,148,276 19,172,414
1.59 (3,279,365) (3,301,587)
20,593,911 20,601,596