On December 31, 20X5, KTR Corporation acquired 80% of the outstanding shares of SJC Limited for $ 5,000,000. KTR is a Vancouver- based company, while SJC is based in Las Vegas, in the US. SJC€™s financial statements follow:
SJC Ltd.
Statement of Financial Position
as of December 31

SJC Ltd.
Statement of Comprehensive Income and Retained Earnings
Year ended December 31, 20X5
Sales................................................................................................................ US $ 5,000,000
Cost of sales..................................................................................................... (3,200,000)
Amortization expense...................................................................................... (350,000)
Bond interest expense..................................................................................... (240,000)
Other expenses................................................................................................. (470,000)
Net income....................................................................................................... 740,000
Retained earnings, January 1, 20X5................................................................. 1,250,000
.......................................................................................................................... 1,990,000
Dividends paid.................................................................................................. (50,000)
Retained earnings, December 31, 20X5........................................................... US $ 1,940,000
Additional Information
1. Inventory on hand as at December 31, 20X5, and December 31, 20X6, was purchased when the exchange rates were US$ 1.00 C$ 1.10 and US$ 1.00 C$ 1.28, respectively. Sales and purchases occurred evenly throughout 20X6.
2. Of the $ 3,000,000 plant and equipment (net) recorded on the December 31, 20X5, SFP, $ 2,000,000 (net) was purchased on December 31, 20X1, and $ 1,000,000 (net) was purchased on December 31, 20X5. Plant and equipment costing an additional $ 600,000 was purchased on December 31, 20X6. The plant and equipment purchased in 20X1 and 20X5 is being amortized at $ 250,000 per year and $ 100,000 per year respectively.
3. Dividends were declared and paid on October 31, 20X6.
4. The bonds were issued at par on December 31, 20X1, with an 8% interest rate, and they mature on December 31, 20X11. They pay interest semi-annually
5. Ignore the impact of income taxes in the question.
6. Foreign exchange rates were as follows:
December 31, 20X1................................................................................... US$ 1.00 = C$ 1.00
December 31, 20X5................................................................................... US$ 1.00 = C$ 1.20
October 31, 20X6...................................................................................... US$ 1.00 = C$ 1.27
December 31, 20X6................................................................................... US$ 1.00 = C$ 1.30
Average for 20X6..................................................................................... US$ 1.00 = C$ 1.25

Required
1. You are the controller of KTR. Assuming that SJC€™s functional currency is the Canadian dollar, translate the SCI for the year ended December 31, 20X6, into Canadian dollars. Include an independent calculation of any foreign exchange gains/ losses.
2. Assuming that SJC€™s functional currency is the Canadian dollar, translate the following SFP accounts for SJC into Canadian dollars as at December 31, 20X6:
a) Accounts receivable
b) Plant and equipment (net)
c) Bonds payable
3. Assuming that SJC€™s functional currency is the US dollar, translate the following SFP accounts for SJC into Canadian dollars as at December 31, 20X6:
a) Plant and equipment (net)
b) Common shares
c) Retained earnings
4. Assume that you have just been hired at KTR and you are discussing the operations of SJC with the chief executive officer. List two questions about the operations of SJC that you could ask the CEO to help you establish SJC€™s functionalcurrency..

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20X620X5 Assets Cash Accounts receivable Inventory Equipment, net USS 300,000 USS 250,000 1,100,000 2,100,000 1,800,000 32000 3000000 US $7.000000US $6150000 1,350,000 Liabilities and shareholders' equity Accounts payable Bonds payable Common shares Retained eamings USS 560,000 USS 400,000 3,000,000 1,500,0001,500,000 1940,000 250,000 US $70000006150000 3,000,000