On January 1, 2020, Big Co. purchased 100% of the shares of Small Inc. Big Co. reports in Canadian dollars.

Small’s statements are as follows:

Small Inc.
Statement of Comprehensive Income
For the Year Ended Dec 31, 2020
	US$
Revenue	350,000
Other expenses	120,000
Depreciation expense	60,000
Interest expense	40,000
	220,000
Net Income & Comprehensive Inc	130,000

Small Inc.
Statement of Financial Position
December 31,		2020	2019
Assets		US$	US$
	Cash	65,000	40,000
	Accounts receivable	40,000	55,000
	Land	70,000
	PP&E	600,000	600,000
	Accumulated depreciation	(120,000)	(60,000)
	Total Assets	655,000	635,000
Liabilities & Share Equity
	Accounts payable	10,000	20,000
	Notes Payable	100,000	100,000
		110,000	120,000
	Common shares	505,000	505,000
	Retained earnings	40,000	10,000
		545,000	515,000
	Total Liab & Share Equity	655,000	635,000

Other information:

• Assume Jan 1, 2020 balances are the same as Dec 31, 2019.
• The land was purchased May 1, 2020.
• There has been no purchases or disposals of PP&E during 2020.
• Dividends of $100,000 were declared and paid on Dec 1, 2020.
• Revenue and expenses were incurred evenly throughout the year.

Foreign exchange rates:		Cdn$
1-Jan-20	US$1	1.40
1-May-20	US$1	1.34
1-Dec-20	US$1	1.36
31-Dec-20	US$1	1.31
Average for 2020	US$1	1.35

Required:

Assume that Small’s functional currency is determined to be the Canadian dollar. Translate Small’s financial statements into Canadian dollars for purposes of consolidation (functional currency method):

1. The statement of comprehensive income for the year ended December 31, 2020
2. The statement of financial position at December 31, 2020
   • For (a)&(b) show the statements with US$ amounts in one column, exchange rate used in next column (as applicable), and then the Cdn$ amounts. Show all calculations below your statements that require more detail to translate.

Answer rating: 100% (QA)

To translate Small Incs financial statements into Canadian dollars for purposes of consolidation we ... View the full answer