On December 31, 2019, Hilman Enterprises of Montreal paid $12,000,000 for 100% of the outstanding shares of Wilsen Corp of the United States. Wilsen's fair values approximated its book values on that date.Wilsen's comparative balance sheets for 2019 and 2020 are shown below:Balance Sheet as atDecember 31 (in U.S. Dollars) 2020 2019 Current Monetary Assets $ 8 , 000 , 000 $ 7 , 500 , 000 Inventory $ 2 , 000 , 000 $ 3 , 000 , 000 Plant and Equipment (Net) $ 1 , 500 , 000 $ 1 , 800 , 000 Total Assets $ 11 , 500 , 000 $ 12 , 300 , 000 Current Liabilities $ 1 , 100 , 000 $ 2 , 300 , 000 Bonds Payable (due Dec 31 , 2026 ) $ 5 , 000 , 000 $ 5 , 000 , 000 Common Shares $ 4 , 000 , 000 $ 4 , 000 , 000 Retained Earnings $ 1 , 400 , 000 $ 1 , 000 , 000 Total Liabilities and Equity $ 11 , 500 , 000 $ 12 , 300 , 000 \begin{array}{|l|r|r|}\hline & \mathbf{2 0 2 0} & \mathbf{2 0 1 9} \\hline ext { Current Monetary Assets } & \$ 8,000,000 & \$ 7,500,000 \\hline ext { Inventory } & \$ 2,000,000 & \$ 3,000,000 \\hline ext { Plant and Equipment (Net) } & \$ 1,500,000 & \$ 1,800,000 \\hline ext { Total Assets } & \$ 11,500,000 & \$ 12,300,000 \\hline ext { Current Liabilities } & \$ 1,100,000 & \$ 2,300,000 \\hline ext { Bonds Payable (due Dec } 31,2026) & \$ 5,000,000 & \$ 5,000,000 \\hline ext { Common Shares } & \$ 4,000,000 & \$ 4,000,000 \\hline ext { Retained Earnings } & \$ 1,400,000 & \$ 1,000,000 \\hline ext { Total Liabilities and Equity } & \$ 11,500,000 & \$ 12,300,000\\hline\end{array} Current Monetary Assets Inventory Plant and Equipment (Net) Total Assets Current Liabilities Bonds Payable (due Dec 31 , 2026 ) Common Shares Retained Earnings Total Liabilities and Equity 2020 $8 , 000 , 000 $2 , 000 , 000 $1 , 500 , 000 $11 , 500 , 000 $1 , 100 , 000 $5 , 000 , 000 $4 , 000 , 000 $1 , 400 , 000 $11 , 500 , 000 2019 $7 , 500 , 000 $3 , 000 , 000 $1 , 800 , 000 $12 , 300 , 000 $2 , 300 , 000 $5 , 000 , 000 $4 , 000 , 000 $1 , 000 , 000 $12 , 300 , 000 Income Statement forthe Year endedDecember 31, 2020 Sales $ 5 , 200 , 000 Inventory, January 1, 2020 $ 3 , 000 , 000 Purchases $ 3 , 000 , 000 Inventory, December 31,2020 ( $ 2 , 000 , 000 ) Depreciation Expense $ 300 , 000 Other Expenses $ 400 , 000 $ 4 , 700 , 000 Net Income $ 500 , 000 \begin{array}{|l|r|}\hline ext { Sales } & \$ 5,200,000 \\hline ext { Inventory, January 1, 2020 } & \$ 3,000,000 \\hline ext { Purchases } & \$ 3,000,000 \\hline ext { Inventory, December 31,2020 } & (\$ 2,000,000) \\hline ext { Depreciation Expense } & \$ 300,000 \\hline ext { Other Expenses } & \$ 400,000 \\hline & \$ 4,700,000 \\hline ext { Net Income } & \$ 500,000\\hline\end{array} Sales Inventory, January 1, 2020 Purchases Inventory, December 31,2020 Depreciation Expense Other Expenses Net Income $5 , 200 , 000 $3 , 000 , 000 $3 , 000 , 000 ( $2 , 000 , 000 ) $300 , 000 $400 , 000 $4 , 700 , 000 $500 , 000 Other Information:Exchange Rates: December 31 , 2019 : US $ 1 = CDN $ 1.1850 Septernber 30 , 2020 : US $ 1 = CDN $ 1.1975 December 31 , 2020 : US $ 1 = CDN $ 1.20 Averape for 2020: US $ 1 = CDN $ 1.15 \begin{array} { | l | r | } \hline ext { December } 31,2019 : & ext { US } \$ 1 = ext { CDN } \$ 1.1850 \\hline ext { Septernber } 30,2020 : & ext { US } \$ 1 = ext { CDN } \$ 1.1975 \\hline ext { December } 31,2020 : & ext { US } \$ 1 = ext { CDN } \$ 1.20 \\hline ext { Averape for 2020: } & ext { US } \$ 1 = ext { CDN } \$ 1.15 \\hline\end{array} December 31 , 2019 : Septernber 30 , 2020 : December 31 , 2020 : Averape for 2020: US $1 = CDN $1.1850 US $1 = CDN $1.1975 US $1 = CDN $1.20 US $1 = CDN $1.15 Wilsen paid US$100,000 in dividends on September 30, 2020. The inventories on hand at the end of 2020 were purchased when the exchange rate was US$1 = CDN$1.195.Sales, purchases and other expenses occurred evenly throughout the year.Translate Wilsen's 2020 Income Statement if Wilsen's functional currency was the U.S. dollar (i.e., the functional currency of the foreign subsidiary is different than the parent's functional currency).

Question

On December 31, 2019, Hilman Enterprises of Montreal paid $12,000,000 for 100% of the outstanding shares of Wilsen Corp of the United States. Wilsen's fair values approximated its book values on that date.Wilsen's comparative balance sheets for 2019 and 2020 are shown below:Balance Sheet as atDecember 31 (in U.S. Dollars) 2020 2019  Current Monetary Assets  $ 8 , 000 , 000 $ 7 , 500 , 000  Inventory  $ 2 , 000 , 000 $ 3 , 000 , 000  Plant and Equipment (Net)  $ 1 , 500 , 000 $ 1 , 800 , 000  Total Assets  $ 11 , 500 , 000 $ 12 , 300 , 000  Current Liabilities  $ 1 , 100 , 000 $ 2 , 300 , 000  Bonds Payable (due Dec  31 , 2026 ) $ 5 , 000 , 000 $ 5 , 000 , 000  Common Shares  $ 4 , 000 , 000 $ 4 , 000 , 000  Retained Earnings  $ 1 , 400 , 000 $ 1 , 000 , 000  Total Liabilities and Equity  $ 11 , 500 , 000 $ 12 , 300 , 000 \begin{array}{|l|r|r|}\hline  &  \mathbf{2 0 2 0}  &  \mathbf{2 0 1 9} \\hline 	ext { Current Monetary Assets }  &  \$ 8,000,000  &  \$ 7,500,000 \\hline 	ext { Inventory }  &  \$ 2,000,000  &  \$ 3,000,000 \\hline 	ext { Plant and Equipment (Net) }  &  \$ 1,500,000  &  \$ 1,800,000 \\hline 	ext { Total Assets }  &  \$ 11,500,000  &  \$ 12,300,000 \\hline	ext { Current Liabilities }  &  \$ 1,100,000  &  \$ 2,300,000 \\hline 	ext { Bonds Payable (due Dec } 31,2026)  &  \$ 5,000,000  &  \$ 5,000,000 \\hline 	ext { Common Shares }  &  \$ 4,000,000  &  \$ 4,000,000 \\hline 	ext { Retained Earnings }  &  \$ 1,400,000  &  \$ 1,000,000 \\hline 	ext { Total Liabilities and Equity }  &  \$ 11,500,000  &  \$ 12,300,000\\hline\end{array}  Current Monetary Assets   Inventory   Plant and Equipment (Net)   Total Assets   Current Liabilities   Bonds Payable (due Dec  31 , 2026 )  Common Shares   Retained Earnings   Total Liabilities and Equity  ​ 2020 $8 , 000 , 000 $2 , 000 , 000 $1 , 500 , 000 $11 , 500 , 000 $1 , 100 , 000 $5 , 000 , 000 $4 , 000 , 000 $1 , 400 , 000 $11 , 500 , 000 ​ 2019 $7 , 500 , 000 $3 , 000 , 000 $1 , 800 , 000 $12 , 300 , 000 $2 , 300 , 000 $5 , 000 , 000 $4 , 000 , 000 $1 , 000 , 000 $12 , 300 , 000 ​ ​   Income Statement forthe Year endedDecember 31, 2020  Sales  $ 5 , 200 , 000  Inventory, January 1, 2020  $ 3 , 000 , 000  Purchases  $ 3 , 000 , 000  Inventory, December 31,2020  ( $ 2 , 000 , 000 )  Depreciation Expense  $ 300 , 000  Other Expenses  $ 400 , 000 $ 4 , 700 , 000  Net Income  $ 500 , 000 \begin{array}{|l|r|}\hline 	ext { Sales }  &  \$ 5,200,000 \\hline 	ext { Inventory, January 1, 2020 }  &  \$ 3,000,000 \\hline 	ext { Purchases }  &  \$ 3,000,000 \\hline 	ext { Inventory, December 31,2020 }  &  (\$ 2,000,000) \\hline 	ext { Depreciation Expense }  &  \$ 300,000 \\hline 	ext { Other Expenses }  &  \$ 400,000 \\hline  &  \$ 4,700,000 \\hline 	ext { Net Income }  &  \$ 500,000\\hline\end{array}  Sales   Inventory, January 1, 2020   Purchases   Inventory, December 31,2020   Depreciation Expense   Other Expenses   Net Income  ​ $5 , 200 , 000 $3 , 000 , 000 $3 , 000 , 000 ( $2 , 000 , 000 ) $300 , 000 $400 , 000 $4 , 700 , 000 $500 , 000 ​ ​   Other Information:Exchange Rates:  December  31 , 2019 :  US  $ 1 =  CDN  $ 1.1850  Septernber  30 , 2020 :  US  $ 1 =  CDN  $ 1.1975  December  31 , 2020 :  US  $ 1 =  CDN  $ 1.20  Averape for 2020:   US  $ 1 =  CDN  $ 1.15 \begin{array} { | l | r | } \hline 	ext { December } 31,2019 :  &  	ext { US } \$ 1 = 	ext { CDN } \$ 1.1850 \\hline 	ext { Septernber } 30,2020 :  &  	ext { US } \$ 1 = 	ext { CDN } \$ 1.1975 \\hline 	ext { December } 31,2020 :  &  	ext { US } \$ 1 = 	ext { CDN } \$ 1.20 \\hline 	ext { Averape for 2020: }  &  	ext { US } \$ 1 = 	ext { CDN } \$ 1.15 \\hline\end{array}  December  31 , 2019 :  Septernber  30 , 2020 :  December  31 , 2020 :  Averape for 2020:  ​  US  $1 =  CDN  $1.1850  US  $1 =  CDN  $1.1975  US  $1 =  CDN  $1.20  US  $1 =  CDN  $1.15 ​ ​   Wilsen paid US$100,000 in dividends on September 30, 2020. The inventories on hand at the end of 2020 were purchased when the exchange rate was US$1 = CDN$1.195.Sales, purchases and other expenses occurred evenly throughout the year.Translate Wilsen's 2020 Income Statement if Wilsen's functional currency was the U.S. dollar (i.e., the functional currency of the foreign subsidiary is different than the parent's functional currency).

Kristi Fuller · Accepted Answer

Final Answer :   U.S. Dollars   CDN Dollars   Sales  $ 5 , 200 , 000 × 1.19 $ 6 , 188 , 000  Inventory, January  1 , 2020 $ 3 , 000 , 000 × 1.19 $ 3 , 570 , 000  Purchases  $ 3 , 000 , 000 × 1.19 $ 3 , 570 , 000  Inventory, December  31 , 2020 ( $ 2 , 000 , 000 ) × 1.19 ( $ 2 , 380 , 000 )  Depreciation Expense  $ 300 , 000 × 1.19 $ 357 , 000  Other Expenses  $ 400 , 000 × 1.19 $ 476 , 000 $ 4 , 700 , 000 $ 5 , 593 , 000  Net Income  $ 4 , 700 , 000 $ 5 , 593 , 000 \begin{array}{|l|r|r|r|}\hline  &  	ext { U.S. Dollars }  &   &  	ext { CDN Dollars } \\hline 	ext { Sales }  &  \$ 5,200,000  &  	imes 1.19  &  \$ 6,188,000 \\hline 	ext { Inventory, January } 1,2020  &  \$ 3,000,000  &  	imes 1.19  &  \$ 3,570,000 \\hline 	ext { Purchases }  &  \$ 3,000,000  &  	imes 1.19  &  \$ 3,570,000 \\hline 	ext { Inventory, December } 31,2020  &  (\$ 2,000,000)  &  	imes 1.19  &  (\$ 2,380,000) \\hline 	ext { Depreciation Expense }  &  \$ 300,000  &  	imes 1.19  &  \$ 357,000 \\hline 	ext { Other Expenses }  &  \$ 400,000  &  	imes 1.19  &  \$ 476,000 \\hline & \$ 4,700,000 & & \$ 5,593,000\\hline 	ext { Net Income }  &  \$ 4,700,000  &   &  \$ 5,593,000 \\hline\end{array}  Sales   Inventory, January  1 , 2020  Purchases   Inventory, December  31 , 2020  Depreciation Expense   Other Expenses   Net Income  ​  U.S. Dollars  $5 , 200 , 000 $3 , 000 , 000 $3 , 000 , 000 ( $2 , 000 , 000 ) $300 , 000 $400 , 000 $4 , 700 , 000 $4 , 700 , 000 ​ × 1.19 × 1.19 × 1.19 × 1.19 × 1.19 × 1.19 ​  CDN Dollars  $6 , 188 , 000 $3 , 570 , 000 $3 , 570 , 000 ( $2 , 380 , 000 ) $357 , 000 $476 , 000 $5 , 593 , 000 $5 , 593 , 000 ​ ​

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