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# Say on January 1, 2017, Company A, a Canadian company, purchases 80% of the outstanding common shares of Company

B, a Mexican Company. Company A pays MP 4,000,000 for its shares in Company B. The Mexican company began operations on that date with a balance sheet consisting of cash of MP 6,000,000, common shares of MP 5,000,000 and long-term debt of MP 1,000,000.

How would we calculate the exchange gain or loss from the translation of the financial statements of Company B if that company is considered to be an integrated foreign operation and translates its financial statements using the functional currency method?

What if we decide to translate the 2017 income statement of Company B if that company is considered to be an integrated foreign operation and translates its financial statements using the functional currency method?

How would we calculate the consolidated net income that Company A would report for 2017 if Company B was considered to be an integrated foreign subsidiary operation and translates its financial statements using the functional currency method?

Similarly, how could we calculate the exchange gain or loss from the translation of Company B's financial statements into Canadian dollars if that company is considered to be a self-sustaining subsidiary and translates its statements using the presentation currency method?

Finally, how do we calculate the amount of noncontrolling interest that Company A would include in its consolidated statement of financial position if it considered Company B to be a self-sustaining subsidiary and translates its statements using the presentation currency method?

This is an excerpt of the financial statements of the company for the year ended December 31, 2017:

Relevant exchange rates were:

January 2, 2017                                 MP 1.00 = Can\$0.10

March 31, 2017                                 MP 1.00 = Can\$0.11

October 1, 2017                                MP 1.00 = Can\$0.13

October 31, 2017                               MP 1.00 = Can\$0.135

December 31, 2017                           MP 1.00 = Can\$0.14

Average for 2017                               MP 1.00 = Can\$0.12

• The company's capital assets were purchased on March 31, 2017.
• The ending inventory was purchased on October 31, 2017.
• Dividends were declared and paid on October 1, 2017.
• Revenues, purchases, and expenses were incurred evenly over the year.
• Company A reported net income of \$360,000 for 2017.

Thanks!

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