Reference no: EM13355276

Golden Bells Inc. is a foreign subsidiary of Northern Bells Ltd., a Canadian company.  Northern Bells had purchased 90% of the outstanding shares of Golden Bells at the beginning of 20X9 for 20,160 foreign currency (FC) units.  At the acquisition date, Golden Bells' balance sheet in FC units is as follows:

	DR	CR
Current monetary assets	14,000
Inventory	11,200
Equipment (net)	28,000
Current liabilities		12,600
Long term debt		22,400
Common shares		14,000
Retained earnings	______	4,200
	53,200	53,200

At the acquisition date, the only acquisition differential was in regard to the equipment, which had a fair value of 30,800 FC and an estimated remaining useful life of 10 years. 

The relevant exchange rates for 20X9 are as follows:

                   January 1                                           FC 1 = $1.10
                   September 15                                    FC 1 = $1.20
                   December 31                                     FC 1 = $1.25
                   Average rate for 20X9                        FC 1 = $1.18

Balance Sheets

December 31, 20X9

 

	Northern Bells Ltd. $	Golden Bells Inc. FC
Assets:
Current monetary assets	44,173	23,800
Inventory	42,000	15,400
Investment in Golden Bells	22,176	-
Equipment (net)	84,000	25,200
Total assets	192,349	64,400
Liabilities:
Current monetary liabilities	36,400	16,800
Long-term debt	56,000	22,400
Total liabilities	92,400	39,200
Shareholders' equity:
Common shares	42,000	14,000
Retained earnings	57,949	11,200
Total shareholders' equity	99,949	25,200
Total liabilities and shareholders' equity	192,349	64,400

Income Statements

Year Ended December 31, 20X9

 

	Northern Bells Ltd. $	Golden Bells Inc. FC
Sales	503,849	140,000
Dividend income	6,300	____-___
Total revenue	510,149	140,000
Cost of goods sold	252,000	82,600
Operating expenses	217,000	44,800
Total expenses	469,000	127,400
Net income	41,149	12,600

 

At the end of 20X9, Northern Bells and Golden Bells declared dividends of $30,800 and 5,600 FC, respectively.

Golden Bells' goods in inventory at the end of 20X9 were from a special purchase made September 15, 20X9.

Golden Bells had a goodwill impairment loss of 140 FC that occurred evenly throughout 20X9.

Northern Bell uses the entity theory method to consolidate its subsidiary.

Required:

Prepare Northern Bell's consolidated financial statements for December 31, 20X9, assuming that Golden Bell's functional currency is

a)  the Canadian dollar, and  

b)  the foreign currency unit.