Reference no: EM133139622
Question - On December 31, 2020, Poppy Corporation purchased 60% of the outstanding common shares of Seed Company. On January 1, 2017, Seed issued common shares and began operations by purchasing US$200,000 of machinery. Following are the 2021 and 2020 summarized financial statements of Seed:
|
2021 (Amount in US$)
|
2020 (Amount in US$)
|
|
Cash
|
$80,000
|
$70,000
|
|
Accounts receivable
|
148,000
|
180,000
|
|
Inventory
|
260,000
|
220,000
|
|
Machinery, net
|
225,000
|
100,000
|
|
$713,000
|
$570,000
|
|
|
|
|
Accounts payable
|
$100,000
|
$50,000
|
|
Bonds payable
|
250,000
|
250,000
|
|
Common shares
|
200,000
|
200,000
|
|
Retained earnings
|
163,000
|
70,000
|
|
$713,000
|
$570,000
|
|
|
|
|
Sales
|
$3,000,000
|
|
|
Cost of goods sold
|
2,400,000
|
|
|
Gross Profit
|
600,000
|
|
|
Amortization expenses
|
35,000
|
|
|
Interest expense
|
20,000
|
|
|
Other expense
|
402,000
|
|
|
Net income
|
$143,000
|
|
The exchange rates were as follows:
January 1, 2017 US$ 1 = CA$ 1.80
Average, 4th quarter 2020 US$ 1 = CA$ 2.00
December 31, 2020 US$ 1 = CA$ 2.10
March 31, 2020 US$ 1 = CA$ 2.11
July 1, 2017 US$ 1 = CA$ 2.15
Average, 4th quarter 2021 US$ 1 = CA$ 2.20
Average for 2021 US$ 1 = CA$ 2.12
December 31, 2021 US$ 1 = CA$ 2.30
On July 1, 2021, Seed purchased an additional US$ 160,000 of machinery. The company amortizes all machinery over 8 years on a straight-line basis. Seed's ending inventory for 2020 and 2021 was purchased evenly over the final quarter for each year respectively. On March 31, 2021, Seed declared dividends of US$ 50,000. Sales, purchases, interest, and other expenses occurred evenly throughout the year.
Required - Prepare the translated income statement of Seed for the year ended December 31, 2021, including a detailed calculation of the foreign exchange gain or loss.