On Dec 31 2019 pumice ltd a Canadian based public company purchased 80% of the shares of Stone Inc for 1900,000 Argentine pesos (AP)

The 2020 financial statements (and 2019 comparative balance sheet are as follows:

Stones INC

Statement of financial position at December 31stt:

Dec 31,2020 Dec 31,2019

Cash 820,000 450,000

Accounts receivable 317,500 405,000

Inventory 730,000 600,000

Plant asset ,net 1,722,500 2145,000

3590,000 3600,000

Accounts payable 280,000 550,000

Notes payable 700,000 700,000

Common shares 1000,000 900,000

Retained earnings 1610,000 1450,000

3590,000 3600,000

Stones Inc.

Statement of comprehensive income

For the year ended Dec 31, 2020

Sales 10,350,000

Cost of goods sold 6400,000

GROSS PROFIT 3950,000

Amortization expense 122,500

other expense 3499,500

TOTAL OPERATING EXPENSE 3622,000

Operating income 328,000

Gain on sale of capital asset 120,000

Income before taxes 448,000

Income tax expense 88,000

Comprehensive income 360,000

Other information

1. The plant asset were purchased when the company was formed on January 1, 2016 when the exchange rate was 1 AP= $ 0.62 CAD. A group of plant assets were disposed of on Jan 1 2020.

No other assets were purchased or disposed of during the year.

2. The notes payable are due on January 1 2024 and were issued on July 1 2018.

3. unless otherwise noted, all sales, purchases, stock issues and expenses were incurred evenly throughout the year.

4. Inventory on hand at december 31 ,2020 and december 31, 2019, was purchased evenly in Dec 2020 and Dec 2020 respectively.

5. Cash dividends were declared and paid by stone Inc on april 1 2020, when the exchange rate was 1 AP = $0.77 CAD.

6. Select exchange rate are as follows:

Date Exchange rate

July1,2018 1 AP= $0.65 CAD

Jan1,2019 1 AP= $ 0.70 CAD

Dec 2019 avg rate 1 AP= $0.71 CAD

Dec31,2019/jan1,2020 1 AP= $0.75 CAD

Dec2020 average 1 AP= $0.81 CAD

Jan1-Dec31 2020 avg 1 AP= $0.80 CAD

Dec31,2029 1 AP= $0.82 CAD

Question 1

Assume that pumice has assessed Stone as a integrated subsidiary. Calculate the foreign exchange gain/loss for the translation of stones financial

statements into Canadian Dollars, using the temporal method.

Question 2

Where will this gain or loss be reported on the translated financial statements?