On December 31, 2017, M&M Ltd. paid FC400,000 to obtain 100% of the ordinary shares of Alibaba Ltd., a forging company. On this date the exchange rate was FC1 = C$1.38. On the day of the acquisition, the carrying amount of Alibaba identifiable net assets was FC360,000 and all carrying amounts were equal to fair values. No goodwill impairment has occurred. Alibaba is a self-sustaining foreign operation. The income statement information and its statement of financial position information relating to the year ended December 31, 2018, are presented below:

Income statement information:

Revenue                                         FC820,000

Cost of goods sold                               512,000

Other expenses                                    168,000

Total expenses                                     725,000

Net income                                        FC 95,000

Statement of financial position information:

Cash and receivables                                FC 65,000

Inventory                                                          77,000

Property, plant and equipment (net)    640,000

Total assets                                               FC 782,000

Monetary liabilities                                   FC 357,000

Ordinary shares                                                 ?

Retained earnings                                        325,000

Total liabilities and equity                       FC 782,000

Additional information

1.Exchange rates were as follows:

December 31, 2018 FC1= C$1.30

Average for 2018 FC1= C$1.34

2.Sales, cost of goods sold, and other expenses occurred evenly throughout the year.

3.A dividend of FC30,000 was declared and paid on December 31, 2018.

4.All items of property, plant and equipment had been purchased by Alibaba when the company began on July 14, 2005, when the exchange rate was FC1 = C$1.66.

5.At December 31, 2017, Alibaba had inventory of FC65,000. The inventory had been purchased when FC1 = C$1.40. Alibaba had inventory purchases during the year of FC524,000 and these purchases occurred evenly throughout the year. The ending inventory was purchased when the exchange rate was FC1 = C$1.31.

6.At December 31, 2017, Alibaba's monetary liabilities exceeded its monetary assets by FC390,000.

What are the consolidated financial statements of M&M Lt. for the year ending December 31, 2018 assuming Alibaba Ltd. is a self-sustaining operation?

Answer rating: 100% (QA)

Solution The consolidated financial statements of MM Ltd for the year ending December 31 2018 assuming Alibaba Ltd is a selfsustaining operation would ... View the full answer