Q. No. 3. On January 1, 2020, Larmer Corp. (a Canadian company) purchased 80% of Martin Inc, an American company, forUS$50,000. Martin's book values approximated its fair values on that date except for plant and equipment, which had a fairvalue of US$30,000 with a remaining life expectancy of 5 years. A goodwill impairment loss of US$1,000 occurred during2020. Martin's January 1, 2020 Balance Sheet is shown below (in U.S. dollars):Current Monetary AssetsInventoryPlant and EquipmentTotal AssetsCurrent LiabilitiesBonds Payable (maturity: January 1, 2026)Common SharesRetained EarningsTotal Liabilities and EquityThe following exchange rates were in effect during 2020.January 1, 2020:Average for 2020:Date when Ending Inventory Purchased:December 31, 2020:Current Monetary AssetsInventoryPlant and EquipmentInvestment in Martin (at Cost)Sales, purchases, and other expenses occurred evenly throughout the year. Dividends declared and paid December 31,2020. The financial statements of Larmer (in Canadian dollars) and Martin (in U.S. dollars) are shown below:Balance SheetsAssetsCurrent LiabilitiesBonds Payable (maturity: January 1, 2026)Common SharesRetained EarningsNet IncomeDividendsLiabilities and EquityIncome StatementsSalesDividend IncomeCost of SalesDepreciationOther expensesNet Income$50,000$40,000$25,000$115,000$45,000$20,000$30,000$20,000$115,000US $1 = CDN $1.3250US $1 = CDN $1.3350US $1 = CDN $1.34US $1 CDN $1.35Larmer$42,050$60,000$23,500$66,250$191,800$50,000$35,000$60,000$30,000$28,800($12,000)$191,800Larmer$80,000$10,800($40,000)($10,000)($12,000)$28,800Martin$65,000$50,000$20,000$135,000$48,000$20,000$30,000$20,000$27,000($10,000)$135,000Martin$50,000($15,000)($5,000)($3,000)$27,000Compute Martin's exchange gain or loss for 2020 if Martin's functional currency was the Canadian dollar (i.e. the samefunctional currency as the parent).

Consolidation - Financial reports from subsidiary companies are assembled and subsequently…

Q. No. 3. On January 1, 2020, Larmer Corp. (a Canadian company) purchased 80% of Martin Inc, an American company, for US$50,000. Martin's book values approximated its fair values on that date except for plant and equipment, which had a fair value of US$30,000 with a remaining life expectancy of 5 years. A goodwill impairment loss of US$1,000 occurred during 2020. Martin's January 1, 2020 Balance Sheet is shown below (in U.S. dollars): Current Monetary Assets Inventory Plant and Equipment Total Assets Current Liabilities Bonds Payable (maturity: January 1, 2026) Common Shares Retained Earnings Total Liabilities and Equity The following exchange rates were in effect during 2020. January 1, 2020: Average for 2020: Date when Ending Inventory Purchased: December 31, 2020: $50,000 $40,000 $25,000 $115,000 $45,000 $20,000 $30,000 $20,000 $115,000 US $1= CDN $1.3250 US $1= CDN $1.3350 US $1 = CDN $1.34 US $1= CDN $1.35

Q. No. 3. On January 1, 2020, Larmer Corp. (a Canadian company) purchased 80% of Martin Inc, an American company, for US$50,000. Martin's book values approximated its fair values on that date except for plant and equipment, which had a fair value of US$30,000 with a remaining life expectancy of 5 years. A goodwill impairment loss of US$1,000 occurred during 2020. Martin's January 1, 2020 Balance Sheet is shown below (in U.S. dollars): Current Monetary Assets Inventory Plant and Equipment Total Assets Current Liabilities Bonds Payable (maturity: January 1, 2026) Common Shares Retained Earnings Total Liabilities and Equity The following exchange rates were in effect during 2020. January 1, 2020: Average for 2020: Date when Ending Inventory Purchased: December 31, 2020: $50,000 $40,000 $25,000 $115,000 $45,000 $20,000 $30,000 $20,000 $115,000 US $1= CDN $1.3250 US $1= CDN $1.3350 US $1 = CDN $1.34 US $1= CDN $1.35

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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