Problems 1-4: 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 ownerâs 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 Bieberâs 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.
INCOME
9700
1,609,700
0
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.
REQUIRED: 1) REMEASURE THE FINANCIAL STATEMENTS OF BIEBER INTO US
DOLLARS USING THE TEMPORAL METHOD
2) TRANSLATE THE FINANCIAL STATEMENTS OF BIEBER INTO US DOLLARS USING
THE CURRENT RATE METHOD
3) PREPARE A CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT FOR
GAGA WHEN BIEBER USED THE TEMPORAL METHODâ¦NOTE WORKSHEET ENTRIES
ARE NOT NEEDED ONLY THE STATEMENTS THEMSELVES (hint: donât forget the
goodwill at acquisition)