On June 1, 2014, Fleming Co. sold goods to BFF Ltd. for FC 200,000

Assignment 3This assignment should be completed after Chapter 12. It contributes 10% towardyour final grade. Remember to show all your work as partial marks may be awarded.Question 1(15 marks)On June 1, 2014, Fleming Co. sold goods to BFF Ltd. for FC 200,000 and entered intoa 90-day forward contract with a financial institution to deliver FC 200,000. Flemingexpects to collect payment from BFF in 90 days. Fleming has a July 31 year-end.Selected exchange rates are presented below:June 1, 2014July 31, 2014August 30, 2014Spot RateFC1= $1.5717 CADFC1= $1.5600 CADFC1= $1.5500 CADForward rate to August 30FC1= $1.5702 CADFC1= $1.5594 CADRequired:a)Prepare dated journal entries for Fleming to reflect the above transactionsusing the current method. Do not use hedge accounting.b)Prepare dated journal entries for Fleming to reflect the above transactionsusing the net method. Do not use hedge accounting.c)Explain how your journal entry on the settlement date would change if thereceivable was hedged.Question 2(55 marks)In 2015, Corbus Co., a Canadian company, created a foreign subsidiary calledSnazzy Ltd. by investing $2,000,000 CAD (800,000 FC) in return for all of Snazzy’scommon shares. In preparing to start operations, Snazzy acquired equipment for960,000 FC and took out a 320,000 FC loan. Snazzy is committed to repaying theloan in 3 years. In 2016, Snazzy acquired a tract of land for 320,000 FC. Alldividends were paid on December 31 of the years in which they were declared.Snazzy’s financial statements for its first 2 years of operations are presented below.ACCT451v12Assignment 3September 4, 20142Snazzy Ltd.Statement of Financial PositionAs of December 31(in FC)2016Assets:Current assets:CashAccounts receivable$Noncurrent assets:LandEquipmentAccumulated amortization48.00064,000112,000320,000960,000(192,000)1,088,000$ 1,200,000Total assetsLiabilities and shareholder’s equity:Current liabilities:Accounts payableNoncurrent liabilities:Loan payable$256,00048,000304,000960,000(96,000)864,000$ 1,168,00016,000Total liabilities and shareholder’s equity32,000320,000336,000Shareholder’s equity:Share capitalRetained earnings320,000352,000800,000_64,000864,000$ 1,200,000800,000_16,000816,000$ 1,168,000Snazzy Ltd.Statement of Comprehensive IncomeFor the year ended December 31(in FC)2016RevenueExpenses:AmortizationInterestOther expenses2015$ 480,000Net and comprehensive incomeACCT451v122015Assignment 3$ 352,00096,00064,000192,000352,000$ 128,00096,00064,000128,000288,000$ 64,000September 4, 20143Snazzy Ltd.Statement of Changes in Equity – Retained Earnings SectionFor the year ended December 31(in FC)2016Retained earnings, beginning of yearNet incomeDividends declaredRetained earnings, end of year$ 16,000128,000(80,000)$ 64,0002015$64,000(48,000)$ 16,000Selected exchange rateswhen the equipment was purchasedwhen the loan was negotiatedwhen the land was purchasedaverage during 2015December 31, 2015Average during 2016December 31, 20161FC = $2.30 CAD1FC = $2.40 CAD1FC = $1.90 CAD1FC = $2.20 CAD1FC = $2.00 CAD1FC = $1.70 CAD1FC = $1.50 CADRequired:a)Assume that Snazzy’s functional currency is the Canadian dollar.i) Translate Snazzy’s 2015 financial statements using the appropriatemethod.ii) Independently calculate the translation gain/loss.iii) Repeat (i) and (ii) for 2016.b)Assume that Snazzy’s functional currency is the FC.i) Translate Snazzy’s 2015 financial statements using the appropriatemethod.ii) Independently calculate the translation gain/loss.iii) Repeat (i) and (ii) for 2016.ACCT451v12Assignment 3September 4, 20144Question 3(15 marks)Prints Galore Ltd., a Canadian company, acquired 100% of Sculptures Ltd. for FC300,000 on January 1, 2014. Prints Galore’s functional currency is the Canadiandollar and Sculpture’s functional currency is the FC. Selected exchange rates arepresented below:January 1, 2014December 31, 2015December 31, 2016FC1 = $1.6993 CADFC1 = $1.7182 CADFC1 = $1.7233 CADAssume that the average rate for 2014, 2015, and 2016 is FC 1 = $1.7201 CAD.Required:a)At the time of acquisition, the fair value of Sculpture’s net assets was FC200,000. There has been no impairment of goodwill.i) Calculate the amount of goodwill that should be presented on PrintsGalore’s December 31, 2016 consolidated statement of financial position.ii) Calculate the amount of exchange gain/loss, if any, that should bereported on Prints Galore’s 2016 consolidated statement of income underother comprehensive income.b)Assume that at the time of acquisition, the fair value of Sculpture’s net assetsis FC 300,000. All of the net assets equaled their carrying value with theexception of some machinery which exceeded its carrying value by FC100,000. The machinery has a remaining useful life of 5 years. Both Printsand Sculpture use straight-line amortization.i) At the end of 2016, what amount, if any, of the acquisition differentialshould be added to the net book value of the equipment?ii) Calculate the amortization expense, if any, related to the acquisitiondifferential that should be included in Prints’ consolidated statement ofcomprehensive income for 2016.iii) Calculate the ending balance of the cumulative exchange gain, cumulativeOCI.ACCT451v12Assignment 3September 4, 20145Question 4(15 marks)Senior Immigrants (SI) is an NFPO established a few years ago to help seniorimmigrants learn English and integrate into Canadian society. SI has some paid staffsupported by a large group of volunteers. The organization is funded by governmentgrants and private donations. During the current year, the following eventsoccurred:SI-was awarded a $1,000,000 government grant. The terms of the grant are:$380,000 for the acquisition of four mini-buses$120,000 for rent for the next 2 years$500,000 for SI’s operations and programsIn the current year, SI received $750,000—$380,000 for the mini-buses,$120,000 for the rent, and $250,000 for its operations and programs. Theremaining $250,000 will be released next year.During the current year, SI paid actual rental costs of $55,000.A local car dealership that has made substantial donations to SI in the pastsupplied the mini-buses and customized them to SI’s requirements. Thecustomized vehicles have a fair value of $500,000, but the car dealership soldthe vehicles to SI for $425,000. SI took delivery of the vehicles in the summer ofthe current year.The vehicles are expected to have a 10-year useful life. SI’s policy is to take a fullyear’s of amortization in the year of acquisition.In the current year, SI paid salaries of $150,000. $25,000 of the salaries relatedto fundraising for endowments and the rest was related to operations and SI’sannual fundraising projects.In the current year, SI paid $10,000 for a training seminar for volunteers.In the spring of the current year, SI held a karaoke fundraiser that raised$50,000. SI incurred $21,000 in costs related to this fundraiser. The funds raisedhave been designated by the donor for SI’s Canadian cooking program.SI’s participation in an annual local television telethon resulted in pledges of$235,000. $169,000 had been collected by the end of the current year.On July 1 of the current year, SI received an endowment of $250,000 from arefugee who became a successful business person in Canada. The investmentincome from this endowment can be used by SI as it sees fit. The funds wereinvested in bonds that have an annual yield of 3%.ACCT451v12Assignment 3September 4, 20146Required:Prepare the necessary journal entries for the current year usinga)the deferral methodandb)the restricted fund method.Be sure the account names you use clearly identify the type of account or fund.ACCT451v12Assignment 3September 4, 2014