Required A) Should Cadbury be classified as self-sustaining or an integrated subsidiary? State three facts from the

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Question:

Cadbury Company ("Cadbury") is a foreign subsidiary of Kraft Foods Corporation (a Canadian company). It was

Accounts payable CHF 310,000 CHF 355,000 Bonds payable 500,000 500,000 Ordinary shares 1,100,000 600,000 Retained earnings 29 Amortization 150,000 Income before income taxes 150,000 Income taxes 50,000 Net income CHF 100,000 Additional information 1.

Required

A) Should Cadbury be classified as self-sustaining or an integrated subsidiary? State three facts from the question to support your answer. (2 marks)

B) Disregard your response to part (a) and translate Cadbury’s 2019 statement of income, assuming that Cadbury’s functional currency is the Canadian dollar (temporal method). As part of your solution, provide a detailed calculation of the foreign exchange gain or loss.

C) Disregard your responses to parts (a) and (b), and translate the following December 31, 2019 accounts, assuming Cadbury’s functional currency is the Swiss francs (CHF) (current rate method).

Equipment
Bonds payable
Cumulative (other comprehensive income/loss) translation adjustment

D) Since the current rate method uses the closing rate to translate equipment, the translated equipment amount should represent the fair value of the equipment in Canadian dollars. Do you agree or disagree? Briefly explain.