Chill Inc. purchased all the shares of Macro Ltd., a company located in Italy, on Jan 1, Year 5. Macro reports its financial statements in Euros. In preparation for consolidation, the statements need to be translated to their Canadian dollar equivalents. 

The CEO’s immediate concern is net income. 

 Dec 31, Year 6 Dec 31, Year 5 

Cash 246,500 93,250 

Accounts receivable 154,500 186,000 

Inventory 138,000 147,000 

Plant and equipment, net 350,000 376,250 

Total assets 889,000 802,500 

Trade accounts payable 70,000 89,000 

Dividends payable 25,000 14,000 

Mortgage payable 295,000 308,000 

Common stock 151,000 146,500 

Retained earnings 348,000 245,000 

Total liabilities and equity 889,000 802,500 

"Macro Ltd. Statement of Earnings and Retained Earnings  For the year ending December 31, Year 6 " 

Sales 1,250,000 

Cost of sales 825,000 

Gross profit 425,000 

Other income 56,000 

Distribution costs 80,000 

Administrative expenses 190,000 

Net earnings before income tax 210,000 

Income tax expense 30,000 

Net earnings 180,000 

Opening retained earnings 245,000 

Dividends declared 77,000 

Ending retained earnings 348,000 During the year, exchange rates changed as follows: Exchange rate September 1, Year 5 € 1.00=Can $1.494 December 31, Year 5 € 1.00=Can $1.502 January 1, Year 6 € 1.00=Can $1.502 January 15, Year 6 € 1.00=Can $1.512 June 30, Year 6 € 1.00=Can $1.486 July 15, Year 6 € 1.00=Can $1.453 September 1, Year 6 € 1.00=Can $1.463 Year 6 average € 1.00=Can $1.458 December 31, Year 6 € 1.00=Can $1.476 "Additional information: • Equipment of €48,000 was acquired on July 15, Year 6. The remaining useful life is 5 years. 

• On June 30, Year 6, equipment was sold for proceeds of €50,000. 

At the time of sale, the book value of the equipment was €35,000 (Cost €78,000; Accumulated depreciation €43,000). 

The gain on sale is included as part of “other income”. 

• Depreciation expense of €35,250 is included with “Administrative expenses”. 

The Canadian dollar equivalent for depreciation has correctly been determined to be $46,850 

• Dividends are declared twice a year on June 30 and December 31. Dividends declared on June 30 are paid on July 15, and dividends declared on December 31 are paid on January 15. 

• Unless specifically noted above otherwise, sales, purchases and expenses are incurred evenly over the year. " 1.Assume that the functional currency of Marco is the Canadian dollar. 

Calculate the exchange gain or loss for Marco in year 6. (14 marks)

 2. Assume that the functional currency of Marco is not the Canadian dollar. Calculate the exchange gain or loss for Marco in year 6.