CASE DELIVERABLES 1. Provide the journal entries related to the two sale transactions and any hedging transactions associated with these transactions. 2. Make any necessary changes to convert TanCorp’s financial statements to be compliant with U.S. GAAP. 3. Update the financial statements of TanCorp and TechSmart (parent) to reflect these transactions and conversions. 4. Translate TanCorp’s financial statements to USD. 5. Prepare TechSmart’s consolidated financial statements for Y1. 6. Feedback: provide any feedback about what worked or didn’t work about this assignment. This is the first time I’ve assigned this project and I would appreciate any constructive input aimed at improving the project going forward.
Start Here Based on the information in the capstone project information sheet, also available in eCampus, complete this template. Then, submit your answers to eCampus for grading. About the tabs in this template: The green tabs are the base financial statements for TanCorp. This will be your starting point. The yellow tabs are the base financial statements for TechSmart. This will be your starting point. The blue tabs have helpful information (i.e. these instructions, exchange rates). The tabs without color are the tabs you will fill in as part of the assignment. About color-coding of fields in each tab: Instructions are in blue. Areas you need to fill in to work through the case are in grey. Fields you will submit via the eCampus assignment are in green. Good luck! TanCorp I.S. (Yuan) TanCorp Income Statement (Yuan) For the year ended December 31, Y1 Sales¥127,854,000 COGS¥88,237,140 Gross profit¥39,616,860 Selling expenses¥12,675 General & administrative expenses¥25,480 R&D expense¥12,850 Operating income¥39,565,855 Other income/(loss)¥11,820 Net income before taxes¥39,577,675 Income taxes¥1,385,665 Net income¥38,192,010 TanCorp R.E. (Yuan) TanCorp Statement of Retained Earnings (Yuan) For the year ended December 31, Y1 Beginning retained earnings, 1/1/Y1¥2,843,395 Net income, Y1¥38,192,010 Less: dividends declared, Y1¥12,000,000 Ending retained earnings, 12/31/Y1¥29,035,405 TanCorp B.S. (Yuan) TanCorp Balance Sheet (Yuan) December 31, Y1 AssetsLiabilities Cash¥17,537,190Accounts payable¥15,923,050 Accounts receivable¥23,540,065Unearned revenue¥12,293,040 Inventory¥25,482,150Total current liabilities¥28,216,090 Total current assets¥66,559,405Notes payable¥25,402,930 PP&E, net¥127,852,040Total long-term liabilities¥25,402,930 Patent¥986,290 Other intangible assets¥350,400Total liabilities¥53,619,020 Total long-term assets¥129,188,730 Stockholders' Equity Total Assets¥195,748,135Common stock¥50,554,500 Additional paid-in-capital¥62,539,210 Retained earnings¥29,035,405 Total Liabilities & Stockholders' Equity¥195,748,135 TechSmart I.S. (USD) TechSmart Parent-Only Income Statement (USD) For the year ended December 31, Y1 Sales$56,728,540 COGS$22,817,290 Gross profit$33,911,250 Selling expenses$8,548,230 General & administrative expenses$6,738,020 Operating income$18,625,000 Other income/(loss)($1,548,230) Net income before taxes$17,076,770 Income taxes$5,976,870 Net income$11,099,900 TechSmart R.E. (USD) TechSmart Parent-Only Statement of Retained Earnings (USD) For the year ended December 31, Y1 Beginning retained earnings, 1/1/Y1$81,142,725 Net income, Y1$11,099,900 Less: dividends declared, Y1$0 Ending retained earnings, 12/31/Y1$92,242,625 TechSmart B.S. (USD) TechSmart Parent-Only Balance Sheet (USD) December 31, Y1 AssetsLiabilities Cash$14,520,325Accounts payable$18,293,020 Accounts receivable$21,320,520Unearned revenue$5,329,500 Inventory$32,850,230Total current liabilities$23,622,520 Total current assets$68,691,075Bonds payable$120,829,030 PP&E, net$132,859,300Total long-term liabilities$120,829,030 Investments*$56,923,950 Other assets$53,903,190Total liabilities$144,451,550 Total long-term assets$243,686,440 Stockholders' Equity Total Assets$312,377,515Common stock$48,293,050 Additional paid-in-capital$27,390,290 Retained earnings$92,242,625 Total Liabilities & Stockholders' Equity$312,377,515 *Includes equity investment in TanCorp as well as other investments Exchange Rates DateSpot Rate (Yuan/USD)Forward Rate, 1/10/Y2 (Yuan/USD) 1/1/Y07.05497.1293 1/1/Y17.11217.2232 10/31/Y17.0397.0207 11/10/Y16.99587.0012 12/31/Y16.96336.9723 Average, Y17.02767.0544 1/10/Y26.91976.9197 1. Journal Entry Template Use this template to record journal entries to record the foreign currency intercompany transaction and related TechSmart hedging transaction. TechSmart Journal Entries: DateAccount name*DebitCreditNotes 11/10/Y1To record A/R in USD 11/10/Y1No entry needed for forward contract on this dateTo record forward contract 12/31/Y1To update A/R value based on current exchange rates 12/31/Y1To update the forward contract asset/liability *Suggested account names: Accounts receivable - Yuan Sales Foreign exchange gain/loss - NI Forward contract asset/liability Forward contract gain/loss - NI Inputs needed for journal entry amounts: Record change in market value of A/RUpdated value of A/R, 12/31/Y1: Change: Record forward contract at market valueChange in forward contract FV: PV of change, 12%, 10 days)*Note that because there are only 10 days between year end and contract date, the effect of PV will be small 2. IFRS to GAAP Use this template to make a list of the effects of switching from IFRS to U.S. GAAP accounting policies. Note that a given change will affect more than one account. Effects of switch from IFRS to GAAP (TanCorp): Description of ChangeAccount AffectedIncrease/Decrease?Amount (Yuan) 3A. Updated TC IS Copy and paste the original TanCorp Income Statement here. Then, update amounts and accounts accordingly based on your journal entries and IFRS/GAAP conversions. TanCorp Income Statement (Yuan) For the year ended December 31, Y1 PreviousChangesUpdated Sales COGS Gross profit Selling expenses General & administrative expenses R&D expenses Operating income Other income/(loss) Net income before taxes Income taxes Net income 3B. Updated TC RE Copy and paste the original TanCorp Statement of Retained Earnings here. Then, update amounts and accounts accordingly based on your update net income. TanCorp Statement of Retained Earnings (Yuan) For the year ended December 31, Y1 Beginning retained earnings, 1/1/Y1 Net income, Y1 Less: dividends declared, Y1 Ending retained earnings, 12/31/Y1 3C. Updated TC BS Copy and paste the original TanCorp Balance Sheet here. Then, update amounts and accounts accordingly based on your updated RE, as well as journal entries and IFRS/GAAP conversions. TanCorp Balance Sheet (Yuan) December 31, Y1 AssetsPreviousChangesUpdatedLiabilitiesPreviousChangesUpdated CashAccounts payable Accounts receivableUnearned revenue InventoryTotal current liabilities Total current assetsNotes payable PP&E, netTotal long-term liabilities Patent Other intangible assetsTotal liabilities Total long-term assets Stockholders' Equity Total AssetsCommon stock Additional paid-in-capital Retained earnings Total Liabilities & Stockholders' Equity 3D. Updated TS IS Copy and paste the original TechSmart Income Statement here. Then, update amounts and accounts accordingly based on your journal entries and IFRS/GAAP conversions. TechSmart Parent-Only Income Statement (USD) For the year ended December 31, Y1 PreviousChangesUpdated Sales COGS Gross profit Selling expenses General & administrative expenses Operating income Other income/(loss) Net income before taxes Income taxes Net income *Ignore tax effects of change to pretax income; deemed immaterial 3E. Updated TS RE Copy and paste the original TechSmart Income Statement here. Then, update amounts and accounts accordingly based on your updated net income. TechSmart Parent-Only Statement of Retained Earnings (USD) For the year ended December 31, Y1 Beginning retained earnings, 1/1/Y1 Net income, Y1 Less: dividends declared, Y1 Ending retained earnings, 12/31/Y1 3F. Updated TS BS Copy and paste the original TechSmart Statement of Retained Earnings here. Then, update amounts and accounts accordingly based on your updated RE, as well as your journal entries and IFRS/GAAP conversions. TechSmart Parent-Only Balance Sheet (USD) December 31, Y1 AssetsPreviousChangesUpdatedLiabilitiesPreviousChangesUpdated CashAccounts payable Accounts receivableUnearned revenue InventoryOther current liabilities Total current assetsTotal current liabilities PP&E, netBonds payable InvestmentsTotal long-term liabilities Other assets Total long-term assetsTotal liabilities Total AssetsStockholders' Equity Common stock Additional paid-in-capital Retained earnings Total Liabilities & Stockholders' Equity 4A. Translated TC IS Use rates on the exchange rate tab to convert TanCorp's income statement to USD. Refer to assignment sheet for more information. TanCorp Income Statement (USD) For the year ended December 31, Y1 UpdatedRate (¥/$)Translated Sales COGS Gross profit Selling expenses General & administrative expenses R&D expenses Operating income Other income/(loss) Net income before taxes Income taxes Net income 4B. Translated TC RE Use rates on the exchange rate tab to convert TanCorp's statement of retained earnings to USD. Refer to assignment sheet for more information. TanCorp Statement of Retained Earnings (USD) For the year ended December 31, Y1 UpdatedRate (¥/$)Translated Beginning retained earnings, 1/1/Y1 Net income, Y1 Less: dividends declared, Y1 Ending retained earnings, 12/31/Y1 4C. Translated TC BS Use rates on the exchange rate tab to convert TanCorp's balance sheet to USD. Refer to assignment sheet for more information. TanCorp Balance Sheet (USD) December 31, Y1 AssetsUpdatedRate (¥/$)TranslatedLiabilitiesUpdatedRate (¥/$)Translated CashAccounts payable Accounts receivableUnearned revenue InventoryTotal current liabilities Total current assetsNotes payable PP&E, netTotal long-term liabilities Patent Total long-term assetsTotal liabilities Total AssetsStockholders' Equity Common stock Additional paid-in-capital Retained earnings Cumulative translation adjustment*Plug! Total Liabilities & Stockholders' Equity 5A. Consolidation Worksheet Record "fake" journal entry to eliminate intercompany transactions AccountDebitCredit "Fake" journal entry to eliminate equity investment on parent books and subsidiary stockholders equity Summarize the effects of the journal entries above in the table below to make adjustments to the consolidated financial statements easier Summary of Adjustments to F/S Account nameF/SInc/DecAmount *Part of other income/loss on income statement 5B. Consolidated IS To prepare this balance sheet, copy and paste appropriate amounts from the UPDATED TechSmart B/S and the TRANSLATED TanCorp B/S. Then, add in any eliminations to these accounts from your consolidations worksheet. Finally, add across to arrive at consolidated balances. TechSmart Consolidated Income Statement (USD) For the year ended December 31, Y1 TechSmartTanCorpElim.Consolidated Sales COGS Gross profit Selling expenses General & administrative expenses R&D expense Operating income Other income/(loss) Net income before taxes Income taxes Net income 5C. Consolidated RE To prepare this balance sheet, copy and paste appropriate amounts from the UPDATED TechSmart B/S and the TRANSLATED TanCorp B/S. Then, add in any eliminations to these accounts from your consolidations worksheet. Finally, add across to arrive at consolidated balances. TechSmart Consolidated Statement of Retained Earnings (USD) For the year ended December 31, Y1 TechSmartTanCorpElim.Consolidated Beginning retained earnings, 1/1/Y1 Net income, Y1 Less: dividends declared, Y1 Ending retained earnings, 12/31/Y1 5D. Consolidated BS To prepare this balance sheet, copy and paste appropriate amounts from the UPDATED TechSmart B/S and the TRANSLATED TanCorp B/S. Then, add in any eliminations to these accounts from your consolidations worksheet. Finally, add across to arrive at consolidated balances. TechSmart Consolidated Balance Sheet (USD) December 31, Y1 AssetsTechSmartTanCorpElimConsolidatedLiabilitiesTechSmartTanCorpElimConsolidated CashAccounts payable Accounts receivableUnearned revenue InventoryOther current liabilities Total current assetsTotal current liabilities PP&E, netBonds payable PatentNotes payable InvestmentsTotal long-term liabilities Other assets Total long-term assetsTotal liabilities Total AssetsStockholders' Equity Common stock Additional paid-in-capital Retained earnings Cumulative translation adjustment Total Liabilities & Stockholders' Equity Feedback This is my first semester to assign this project. I would really appreciate your feedback. What worked? What didn't? What would make it better for next time? Thank you!!! There will be an essay prompt in eCampus for you to submit this info. It will be worth 0 points, so you do not have to leave feedback if you don’t have any. International Accounting Capstone Case Study ACCT 445/646 Spring 2020 – Cline CASE STUDY OBJECTIVE The purpose of this case study is to apply the accounting principles we discuss in class in one seamless, comprehensive case. To this end, you will: (A) Journalize transactions for a multinational corporation, including imports of inventory and export sales; (B) Convert financial statements from IFRS principles to U.S. GAAP principles; (C) Translate financial statements from foreign currency to USD; (D) Consolidate subsidiary and parent financial statements into one set of consolidated financial statements. To achieve these objectives, please complete the eCampus assignment titled “Capstone Case Study” using the information in the Case Background section below and the associated Excel template, also available on eCampus. You may use your notes and work with others as you complete this assignment; however, the