On December 31, Year 1, Avocado Ltd. of Toronto, Ontario purchased 100% of the outstanding ordinary shares of Acai Inc. of Hong Kong, the People's Republic of China.On this date, the fair values of Acai Inc.'s identifiable assets and liabilities were equal to their carrying amounts.Acai Inc.'s comparative statement of financial position and Year 2 income statement are as follows (HKD = Hong Kong Dollar):

Statement of Financial Position (in HKD) (As of December 31)
	Year 2		Year 1
Cash	$300,000		$140,000
Accounts receivable	216,000		210,000
Inventory	253,000		224,000
Property, plant, and equipment (net)	400,000		450,000
Total assets	$1,169,000		$1,024,000
Accounts payable	$96,000		$81,000
Long-term debt (due Dec 31, Year 5)	500,000		500,000
Common shares	300,000		300,000
Retained earnings	273,000		143,000
Total liabilities and equities	$1,169,000		$1,024,000
Statement of Income (in HKD) (For the year ended December 31, Year 2)
Sales revenue		$1,300,000
Cost of purchases		681,000
Change in inventory		(29,000)
Depreciation expense		50,000
Other expense		218,000
		920,000
Profit		$380,000

Other information:

Exchange rates

December 31, Year 1	HKD$1 = CDN$0.1372
July 31, Year 2	HKD$1 = CDN$0.1405
December 31, Year 2	HKD$1 = CDN$0.1496
Average for Year 2	HKD$1 = CDN$0.1424

Acai Inc. declared dividends on July 31, Year 2 and paid on December 31, Year 2.

The inventories on hand on December 31, Year 2, were purchased when the exchange rate was HKD$1 = CDN$0.1390.

Required:

a) Assume that Acai Inc.'s functional currencyis closelyrelated to Avocado Ltd.'s, calculate the Year 2 exchange gain or loss that would result from the translation of Acai Inc.'s financial statements.(10 marks)

Continuing fromRequired (a),translate the following Year 2 statements into Canadian dollars.

Statement of Income;(9 marks)

Statement of Retained Earnings; and(3 marks)

Statement of Financial Position.(8 marks)

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