In 2015, Corbus Co., a Canadian company, created a foreign subsidiary called Snazzy Ltd. by investing $2,000,000 CAD (800,000 FC) in return for all of Snazzy’s common shares. In preparing to start operations, Snazzy acquired equipment for 960,000 FC and took out a 320,000 FC loan. Snazzy is committed to repaying the loan in 3 years. In 2016, Snazzy acquired a tract of land for 320,000 FC. All dividends 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.

Assume that Snazzy’s functional currency is the FC. i) Translate Snazzy’s 2015 financial statements using the appropriate method.

  

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Snazzy Ltd. Statement of Comprehensive Income For the year ended December 31 (in FC) 2016 2015 Revenue $ 480,000 $ 352,000 Expenses: Amortization Interest 96,000 64,000 192.000 352.000 $ 128,000 96,000 64,000 128.000 288.000 $ 64.000 Other expenses Net and comprehensive income Snazzy Ltd. Statement of Changes in Equity – Retained Earnings Section For the year ended December 31 (in FC) 2016 2015 Retained earnings, beginning of year Net income Dividends declared $ 16,000 128,000 (80.000) $ 64.000 64,000 (48.000) $ 16.000 Retained earnings, end of year Selected exchange rates when the equipment was purchased when the loan was negotiated when the land was purchased average during 2015 December 31, 2015 Average during 2016 December 31, 2016 1FC = $2.30 CAD 1FC = $2.40 CAD 1FC = $1.90 CAD 1FC = $2.20 CAD 1FC = $2.00 CAD %3D 1FC = $1.70 CAD 1FC = $1.50 CAD %3D Snazzy Ltd. Statement of Comprehensive Income For the year ended December 31 (in FC) 2016 2015 Revenue $ 480,000 $ 352,000 Expenses: Amortization Interest 96,000 64,000 192.000 352.000 $ 128,000 96,000 64,000 128.000 288.000 $ 64.000 Other expenses Net and comprehensive income Snazzy Ltd. Statement of Changes in Equity – Retained Earnings Section For the year ended December 31 (in FC) 2016 2015 Retained earnings, beginning of year Net income Dividends declared $ 16,000 128,000 (80.000) $ 64.000 64,000 (48.000) $ 16.000 Retained earnings, end of year Selected exchange rates when the equipment was purchased when the loan was negotiated when the land was purchased average during 2015 December 31, 2015 Average during 2016 December 31, 2016 1FC = $2.30 CAD 1FC = $2.40 CAD 1FC = $1.90 CAD 1FC = $2.20 CAD 1FC = $2.00 CAD %3D 1FC = $1.70 CAD 1FC = $1.50 CAD %3D

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