At the beginning of 2010 GAGA, an American Company purchased all of the stock of

ID: 2474346 • Letter: A

Question

At the beginning of 2010 GAGA, an American Company purchased all of the stock of Bieber Company a Canadian Company for $600,000 US dollars when the Canadian dollar was worth $1. At this time all the assets of Bieber had a book value equal to their market value and the owner’s equity of Bieber was $580,000.

Additional information about Bieber:

In 2011 Bieber bought equipment for 1,000,000 Canadian dollars when the Canadian dollar was worth $0.97.

In 2012 Bieber bought the land for 200,000 Canadian dollars when the Canadian dollar was worth $1.01.

On 12/31/2015 Bieber’s retained earnings in US dollars was $350,000

The average exchange rate in 2016 was 1 Canadian dollar = $0.91

The exchange rate on 12/31/2016 was 1 Canadian dollar = $0.95

The exchange rate on 8/1/2016 when Bieber paid a 10,000 Canadian dollar dividend was 1 Canadian dollar equals $0.97

INCOME STATEMENT for the year 2016

Prepared under US Gaap

GAGA (US $) BIEBER (Canadian $)

SALES 3,000,000 200,000

SALARY EXPENSE 400,000 50,000

DEPRECIATION EXP 1000000 100,000

INVESTMENT INC. 9700 0

INCOME 1,609,700 50000

BALANCE SHEET

GAGA BIEBER

CASH 11,000,000 630,000

A/R 5,000,000 200,000

EQUIPMENT 10,000,000 1,000,000

A/D EQUIPMENT 2,000,000 200,000

LAND 1,000,000 200,000

INVESTMENT IN BIEBER 600,000 0

TOTAL ASSETS 25,600,000 1,830,000

NOTE PAYABLE 5,000,000 800,000

COMMON STOCK 12,500,000 600,000

RETAINED EARNINGS 8,100,000 430,000

NOTE: GAGA USES THE INITIAL VALUE METHOD FOR ITS INVESTMENT IN BIEBER; HENCE THE INVESTMENT STAYS AT 600,000 AND INVESTMENT INCOME IS ONLY THE DIVIDEND OF BIEBER.

Use the following information to answer these questions

a) TRANSLATE THE FINANCIAL STATEMENTS OF BIEBER INTO US DOLLARS USING THE CURRENT RATE METHOD?

b) PREPARE A CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT FOR GAGA WHEN BIEBER USED THE CURRENT RATE METHOD

Explanation / Answer

INCOME STATEMENT

BALANCE SHEET

NOTE: Balance shhet given itself has a difference , total amount of assest is noyt matching, so consolidated is also not possible to get matched.

PARTICULARS AMOUNT ($) SALES (200000*0.91) 182000 SALARY EXPENSE(50000*.91) 45500 DEPRECIATION EXP (100000*0.91) 91000 INCOME 45500

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At the beginning of 2010 GAGA, an American Company purchased all of the stock of

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