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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
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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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: Current Monetary Assets Inventory Plant and Equipment Investment 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 Sheets Assets Current Liabilities Bonds Payable (maturity: January 1, 2026) Common Shares Retained Earnings Net Income Dividends Liabilities and Equity Income Statements Sales Dividend Income Cost of Sales Depreciation Other expenses Net Income $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 Larmer $42,050 $60,000 $23,500 $66,250 $191,800 $50,000 $35,000 $60,000 $30,000 $28,800 ($12,000) $191,800 Larmer $80,000 $10,800 ($40,000) ($10,000) ($12,000) $28,800 Martin $65,000 $50,000 $20,000 $135,000 $48,000 $20,000 $30,000 $20,000 $27,000 ($10,000) $135,000 Martin $50,000 ($15,000) ($5,000) ($3,000) $27,000 Compute Martin's exchange gain or loss for 2020 if Martin's functional currency was the Canadian dollar (i.e. the same functional currency as the parent).
Transcribed Image Text: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: Current Monetary Assets Inventory Plant and Equipment Investment 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 Sheets Assets Current Liabilities Bonds Payable (maturity: January 1, 2026) Common Shares Retained Earnings Net Income Dividends Liabilities and Equity Income Statements Sales Dividend Income Cost of Sales Depreciation Other expenses Net Income $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 Larmer $42,050 $60,000 $23,500 $66,250 $191,800 $50,000 $35,000 $60,000 $30,000 $28,800 ($12,000) $191,800 Larmer $80,000 $10,800 ($40,000) ($10,000) ($12,000) $28,800 Martin $65,000 $50,000 $20,000 $135,000 $48,000 $20,000 $30,000 $20,000 $27,000 ($10,000) $135,000 Martin $50,000 ($15,000) ($5,000) ($3,000) $27,000 Compute Martin's exchange gain or loss for 2020 if Martin's functional currency was the Canadian dollar (i.e. the same functional currency as the parent).
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