On December 31, Year 1, Main Corporation of Toronto paid 15.00 million Bahamian dollars (B$) for 100% of the outstanding common shares of Sub Company of Bahamas. On this date, the fair values of Sub's identifiable assets and liabilities were equal to their carrying amounts. Sub's comparative balance sheets and Year 2 income statement are as follows: Current monetary assets Inventory Plant and equipment (net) Current monetary liabilities Bonds payable, due Dec. 31, Year 6 Common shares Retained earnings INCOME STATEMENT For the year ended December 31, Year 2 Sales Inventory, Jan. 1 Purchases Inventory, Dec. 31 Depreciation expense Other expenses Net income BALANCE SHEET At December 31 Additional Information B$16,600,000 2,460,000 11,120,000 (2,080,000) 160,000 630,000 12,290,000 B$ 4,310,000 Year 2 B$12,440,000 2,080,000 7,620,000 B$22,140,000 B$ 2,200,000 5,000,000 5,200,000 9,740,000 B$22,140,000 Year 1 B$ 9,800,000 2,460,000 7,780,000 B$20,040,000 B$ 2,508,000 5,000,000 5,200,000 7,332,000 B$20,040,000 www

On December 31, Year 1, Main Corporation of Toronto paid 15.00 milion Bahamian dollars (BS) for 100\% of the outstanding corrmon shares of Sub Company of Bahamas. On this date, the fair values of Sub's identifiable assets and liabilities were equal to their carrying amounts, Sub's comparative balance sheets and Year 2 income statement are as follows Additional information Additional Informotion - Exchange rates - Sub Company declared and paid dividends on September 30. Year 2. - The inventories on hand on December 31, Year 2 . were purchased when the exchange rate was B\$1 =$0.63. Required: (a) Assume that Sub's functional currency is the Canadian dollar: (i) Calculate the Year 2 exchange gain or loss that would result from the transiation of Subs financial statements. (Enter answers in whole dollars ond not in millions of dollars. Input oll amounts as positive value. Omit currency symbol in your response.) 5 (ii) Prepare translated financial statements for Year 2 . (Round the values in the "Rote" column to 2 decimal ploces. Exchange gain. if any, should be entered as positive value, and Exchange loss, if ony, should be entered with a minus sign, Enter answers in whole dollars and not in millions of dollars. Input oll other amounts as positive values. Omit currency symbel in your response.) positive values. Omit currency symbol in your response.) (iii) Calculate the amount of goodwill that would appear on the December 31 , Year 2 , consolidated balance sheet if there was an impairment loss of B550,000 during the year. (Enter onswers in whole dollars and not in millions of dollors, Input oll other omounts os positive values. Omit currency symbol in your response.) Goodwill- December 31, Year 2 (iv) Calculate the amount of the exchange gain or loss that would appear in Main's Year 2 consolidated financial statements. (Enter onswers in whole dollors and not in millions of dollars, Input all omounts as positive volue. Omit currency symbol in your response.) (iv) Calculate the amount of the exchange gain or loss that would appear in Main's Year 2 consolldated financial statements. (Enter onswers in whole dollars and not in millions of dollars. Input all amounts os positive value. Omit currency symbel in your response.) (c) Which functional currency would Sub prefer to use if it wants to show the following? (i) The strongest solvency position for the company Functional currency is Canadlan dollat: Functional currency is the Bahamian dollarland shareholders' equity excludes the accumulated foreign exchiange loss. Functional currency is the Bahamian dollar and shareholders' equity includes the accumulated foreign exchange loss. (ii) The best return on shareholders' equity Functional currency is Canadian dollar. Functional currency is the Bahamian dollar and net income which excludes the comprehensive loss is used as the numerator and equity excludes the exchange loss. Functional curtency is the Bahamian dollar and net income which includes the comprehensive loss is used as the numerator and equity includes the exchange loss