Jaap Corp., located in the Netherlands, is a 90% owned subsidiary of a Canadian parent. The company
Question:
Jaap Corp., located in the Netherlands, is a 90% owned subsidiary of a Canadian parent. The company was incorporated on January 1, Year 1, and issued its no-par common shares for 5.0 million guilders (G). The Canadian parent acquired 90% of these shares this time for $2.25 million when the exchange rate was CDN$1 = G2. The financial statements for Jaap on December 31, Year 2, are shown below.
Other Information
On January 3, Year 1, Jaap issued bonds for G2.5 million.
Jaap acquired the plant assets on February 1, Year 1, for G6.0 million. The plant assets are being depreciated on a straight-line basis over a 10-year life.
Jaap uses the FIFO basis to value inventory. The December 31, Year 1, inventory was acquired on October 1, Year 1. The inventory on hand on December 31, Year 2, was acquired on November 15, Year 2.
Jaap did not pay dividends in Year 1, and the Year 2 dividends were declared and paid on December 31, Year 2.
Under the temporal method, Jaap's December 31, Year 1, retained earnings were translated as $561,169.
a) Translate Jaap's Year 2 financial statements into dollars, assuming that it is an integrated foreign operation.
b) Translate Jaap's Year 2 financial statements into dollars, assuming that it is a self sustaining foreign operation.