On January 1, 20X5, Pierre Company of Sherbrooke, Quebec, purchased 80% of the outstanding shares of Simon Limited of Switzerland for CHF200,000. Simons statements of financial position as at December 31, 20X4, and December 31, 20X5, and Simons 20X5 statement of comprehensive income and retained earnings follow.
Simon Ltd.
Statement of Comprehensive Income and Retained Earnings
Year Ended December 31, 20X5
Sales…………………………………………………………………………………..CHF500,000
Cost of sales……………………………………………………………………………(280,000)
Amortization…………………………………………………………………………….(50,000)
Other expenses………………………………………………………………………..(20,000)
Net income………………………………………………………………………………150,000
Retained earnings, January 1, 20X5…………………………………………….95,000
………………………………………………………………………………………………..245,000
Dividends paid…………………………………………………………………………..70,000
Retained earnings, December 31, 20X5……………………………..CHF175,000
Additional Information
1. Simon was incorporated on January 1, 20X2, at which time it acquired all of its equipment and issued its 10-year bonds.
2. Simons purchases and sales occurred evenly during 20X5. Simons December 31, 20X4, and December 31, 20X5, inventory was acquired evenly over the final six months of 20X4 and 20X5, respectively.
3. Dividends were paid on July 1, 20X5.
4. The carrying values of Simons identifiable assets and liabilities approximated fair values. Any purchase price discrepancy should be assigned to goodwill. Ignore income taxes.
5. Foreign exchange rates were as follows:
January 1, 20X2………………………………………………………CHF1 = C$0.90
Average for JulyDecember 20X4……………………………CHF1 = C$0.92
December 31, 20X4/January 1, 20X5……………………….CHF1 = C$0.94
July 1, 20X5…………………………………………………………….CHF1 = C$0.98
December 31, 20X5………………………………………………..CHF1 = C$1.02
Average for JulyDecember 20X5……………………………CHF1 = C$1.00
Average for 20X5……………………………………………………CHF1 = C$0.99
Required
a. Translate the of Simon as at December 31, 20X5, assuming that Simons functional currency is the Swiss franc. Include a separate calculation of any translation gain or loss on the fair value increment related to goodwill.
b. Translate the of Simon for the year ended December 31, 20X5, assuming that Simons functional currency is the Canadian dollar.
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