On January 1, 2013, Polaris acquired all the share capital of Gordon for U.S. $249,800. Polaris has a functional currency of the Canadian dollar and Gordon has the U.S. dollar as the functional currency. At this date, Gordon's equity comprised:

Share capital€”100,000 shares ....U.S. $100,000

Retained earnings ......... U.S. $86,000

All identifiable assets and liabilities of Gordon were recorded at fair value as at January 1, 2013, except for the following:

The equipment is expected to have a further 10-year life. All of the inventory was sold by December 31, 2013. The tax rate is 40%. The following exchange rates exist:
Date ........U.S. $1
January 1, 2013 ....C$0.989
Average 2013 ....C$0.925
December 31, 2013 ..C$01.01
Required
Prepare the acquisition analysis and calculate the fair value adjustments for the preparation of consolidated financial statements in Canadian dollars for Polaris and its subsidiary Gordon as at:
(a) January 1, 2013.
(b) December 31, 2013.

Transcribed Image Text:

In U.S. $ nventory Land Equipment (cost $100,000) Carrying amount $27,000 $35,000 50,000 Fair value $35,000 90,000 60,000