Foreign Currency Translation

On December 31, 2021, Plato Manufacturing Inc. of Calgary purchased 100% of the outstanding common shares of Socrates Inc. of Los Angeles, California.

Socrates comparative statement of financial position and 2022 income statement are as follows:

STATEMENT OF FINANCIAL POSITION
At December 31
				2022			2021
Plant and equipment (net)				US$	6,630,000		US$	7,330,000
Inventory					5,730,000			6,330,000
Accounts receivable					6,130,000			4,730,000
Cash					810,000			930,000
				US$	19,300,000		US$	19,320,000
Common shares				US$	5,030,000		US$	5,030,000
Retained earnings					7,510,000			7,030,000
Bonds payabledue Dec. 31, Year 6					4,830,000			4,830,000
Current liabilities					1,930,000			2,430,000
				US$	19,300,000		US$	19,320,000
INCOME STATEMENT
For the year ended December 31, 2022
Sales	US$	33,000,000
Cost of purchases		25,740,000
Change in inventory		600,000
Depreciation expense		700,000
Other expenses		4,190,000
		31,230,000
Profit	US$	1,770,000

Additional Information

(i) Exchange rates

Dec. 31, 2021	US$1	=	C$1.15
Sep. 30, 2022	US$1	=	C$1.05
Dec. 31, 2022	US$1	=	C$1.07
Average, 2022	US$1	=	C$1.08

(ii) Socrates declared and paid dividends on September 30, 2022.

(iii) The inventories on hand on December 31, 2022, were purchased when the exchange rate was US$1 = C$1.06.

Required:

(a) Assume that Socrates' functional currency is the Canadian dollar:

(i) Calculate the 2022 exchange gain (loss) that would result from the translation of Socrates' financial statements

(ii) Translate the 2022 financial statements into Canadian dollars.

(b) Assume that Socrates' functional currency is the U.S. dollar:

(i) Calculate the 2022 exchange gain (loss) that would result from the translation of Socrates' financial statements and would be reported in other comprehensive income.

(ii) Translate the 2022 financial statements into Canadian dollars.