On December $31,2022,$ ABC Enterprises of Toronto paid $$12,000,000$ for $100\%$ of the outstanding shares of XYZ Corp. of the United States. XYZ$\text{'}$s fair values approximated its book values on that date.

XYZ$\text{'}$s comparative balance sheets for $2022$ and $2023$ are shown below:

Balance Sheet at December $31($in U$.$S$.$ dollars$)$

$2023$

$2022$

Current monetary assets

$$8,000,000$

$$7,500,000$

Inventory

$2,000,000$

$3,000,000$

Plant and equipment $($Net$)$

$1,500,000$

$1,800,000$

Total assets

$$11,500,000$

$$12,300,000$

Current liabilities

$$1,100,000$

$$2,300,000$

Bonds payable $($due December $31,2029)$

$5,000,000$

$5,000,000$

Common shares

$4,000,000$

$4,000,000$

Retained earnings

$1,400,000$

$1,000,000$

Total liabilities and equity

$$11,500,000$

$$12,300,000$

Income Statement For the year ended December $31,2023($in U$.$S$.$ dollars$)$

Sales

$$5,200,000$

Inventory, January $1,2023$

$3,000,000$

Purchases

$3,000,000$

Inventory, December $31,2023$

$(2,000,000)$

Depreciation expense

$300,000$

Other expenses

$400,000$

$4,700,000$

Net income

$$500,000$

Other information

Exchange Rates

December $31,2022$

US $$1=$ CDN $$1\mathrm{.}185$

September $30,2023$

US $$1=$ CDN $$1\mathrm{.}1975$

December $31,2023$

US $$1=$ CDN $$1\mathrm{.}20$

Average for $2023$

US $$1=$ CDN $$1\mathrm{.}19$

XYZ declared and paid US $$100,000$ in dividends on September $30,2023.$

The inventories on hand at the end of $2023$ were purchased when the exchange rate was US$$1=$CDN$$1\mathrm{.}195.$

Sales, purchases, and other expenses occurred evenly throughout the year.

Required:

$1.$ Calculate XYZ$$s exchange gain or loss for $2023$ assuming XYZ$$s functional currency is the same as ABC Enterprise$$ functional currency $($i$.$e$.,$ the Canadian dollar$)$

$2.$ Translate XYZ$$s $2023$ financial statements below assuming XYZ$$s functional currency is the same as ABC Enterprises$$ functional currency $($i$.$e$.,$ the Canadian dollar$)$

Income Statement

Statement of Retained Earnings

Balance Sheet