Consolidated Net Income

Located on the island nation of Bermuda (which has no income tax), Bermuda Bicycle Ltd. (BBL) manufactures bicycle parts and is a 100% subsidiary of Toronto-based parent CanCycle Inc., which acquired BBL on January 1, 20X3. BBL reports in Bermuda Dollars (BD).

On November 30, 20X4 BBL sold bicycle parts to CanCycle for BD500,000 in cash to its parent at a 25% gross margin; 50% this purchase remained in the parent’s inventory on December 31, 20X4. The subsidiary paid dividends of BD400,000 on December 31, 20X4.

BBL’s sales, purchases of inventory, and expenses occurred throughout the year. The beginning inventory was purchased on December 18, 20X3 when the exchange rate was 1BD =1.45CAD; the ending inventory was purchased on December 14, 20X4 when the exchange rate was 1BD = 1.29CAD. All fixed assets were acquired when the exchange rate was 1BD =1.50CAD. Other exchange information is as follows:

Required:
Assuming CanCycle’s non-consolidated 20X4 net income is $1,000,000
(a) calculate consolidated net income, assuming BBL is an integrated subsidiary;
(b) calculate consolidated net income and comprehensive income assuming BBL is a self-sustaining subsidiary.
It is not necessary to prepare a consolidated income statement