Reference no: EM133164647
Question - On December 31, 2018, BUR Canada Inc. acquired 90% of the voting shares of DOE Limited for 690,000 US$. On the acquisition date, the fair values of all the identifiable assets and liabilities for DOE equalled their carrying values.
DOE's main operations are located in USA. It produces and sells fine California wine. Approximately 10% of DOE's sales are in USA, another 15% of sales are made to BUR, and the remainder of its goods are sold throughout the world. BUR acquired its interest in DOE to take advantage of DOE's worldwide distribution network. As a result, approximately 80% of BUR's worldwide sales are distributed through DOE's distribution network. Most of DOE's wine is produced in California, USA. DOE has generated sufficient cash flows from operating activities to finance its operating and investing activities.
The consolidated trial balance of DOE for the years ended December 31, 2021 and 2020 was as follows:
|
2021 (Amount in US$)
|
2020 (Amount in US$)
|
|
Accounts Receivable
|
US$207,000
|
US$70,000
|
|
Inventory
|
266,000
|
215,000
|
|
Building - at cost
|
1,340,000
|
1,340,000
|
|
Equipment - at cost
|
460,000
|
360,000
|
|
Cost of goods sold
|
1,215,000
|
1,200,000
|
|
Amortization expense
|
145,000
|
125,000
|
|
Other expenses
|
471,000
|
475,000
|
|
Dividends paid
|
320,000
|
380,000
|
|
Total Debits
|
US$4,424,000
|
US$4,252,000
|
|
|
|
|
Monetary liabilities
|
US$699,000
|
US$682,000
|
|
Common shares
|
600,000
|
600,000
|
|
Retained Earnings, beginning
|
370,000
|
300,000
|
|
Sales
|
2,190,000
|
2,250,000
|
|
Accumulated amortization
|
565,000
|
420,000
|
|
US$4,424,000
|
US$4,252,000
|
|
|
|
|
Other information
1. Sales, inventory purchases, and other expenses occurred evenly throughout the year.
2. The ending inventory for each year was purchased evenly in the lats quarter of the year.
3. On January 1, 2021, equipment was purchased by DOE for US$100,000. It has been estimated useful life of 8 years and a salvage value of US$5,000. DOE uses the double-declining balance method to calculate amortization expense. The other equipment and the building were acquired on January 1, 2018.
4. The dividends were declared and paid on January 1, 2021.
5. All the liabilities are monetary items.
6. The exchange rates for the USD and the Canadian dollars were as follows:
January 1, 2018????CA$1 = US$ 0.50
December 31, 2018???CA$1 = US$0.60
December 31, 2020/January 1, 2021?CA$1 = US$0.70
Average for the 2020 4th quarter??CA$1 = US$0.68
December 31, 2021???CA$1 = US$0.80
Average for 2021???CA$1 = US$0.76
Average for the 2021 4th quarter ??CA$1 = US$0.79
Required - Prepare the translated income statement of DOE for the year ended December 31, 2021, including a detailed calculation of the foreign exchange gain or loss.