Problems 1-4: At the beginning of 2010 GAGA, an American Company purchasedall of the stock of Bieber Company a Canadian ...

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ACCOUNTING 4211-At the beginning of 2010 GAGA, an American Company

April 14, 2018

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 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.
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 METHOD…NOTE WORKSHEET ENTRIES
ARE NOT NEEDED ONLY THE STATEMENTS THEMSELVES (hint: don’t forget the
goodwill at acquisition)










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