On January 1, 2013, Zoe Ltd. purchased all of the outstanding common shares of Noah Inc., a company based in the United States. This is the first time that Zoe Ltd. has acquired a company that is located outside of Canada and that deals primarily in a currency other than the Canadian dollar.

It is now December 31, 2013 and you have been provided with Noah Inc.'s statements of financial position as at December 31, 2013 and 2012 and their income statement for the year ended December 31, 2013 as follows.

NOAH INC.
Income Statement
For the Year Ended December 31, 2013
In US $
Sales .....................$9,000,000
Cost of Sales .................. 6,200,000
Gross Profit .................. 2,800,000
Other expenses ..................$2,100,000
Income before taxes ............... 700,000
Income taxes .................. $ 300,000
Net Income .................. $ 400,000
Other Information:
Foreign Exchange Rates
January 1, 2013: ................U.S. $1 = C $0.98
December 31, 2013: ................U.S. $1 = C $1.04
2013 Average Rate: ................U.S. $1 = C $1.01
1. Zoe Ltd.'s functional and presentation currency is the Canadian dollar and Noah Ltd.'s is the U.S. dollar. Explain the impacts of this.
2. Calculate the 2013 foreign exchange gain or loss that will arise due to translation and explain where it will be recorded.
Required
Translate Noah Ltd.'s 2013 financial statements into Canadian dollars.

Transcribed Image Text:

NOAH INC. Statement of Financial Position As at In US $ 2013 2012 Cash Accounts Receivable Inventory Plant and Equipment (Net) Total Assets $800,000 5,900,000 5,600,000 8,000,000 $20,300,000 $ 900,000o 6,100,000 5,300,000 7,900,000 $20,200,000 Current Liabilities Long-Term Liabilities Common Shares Retained Earnings Total Liabilities and Shareholder's Equity 6,100,000 7,000,000 1,000,000 6,200,000 $20,300,000 5,900,000 7,500,000 1,000,000 5,800,000 $20,200,000