On December 31, Year 1, Pott Emporium Inc (PEI) of Vancouver purchased 100% of Salem Corp (SC) of Salt Lake City, Utah.

SC's comparative Statement of financial position and Year 2 income Statement isas follows:

Satement of Financial Position
At December 31
	Year 2	Year 1
Plant and equipment (net)	US$ 6,600,000	US$ 7300000
Inventory	5,700,000	6,300,000
Accounts Receivable	6,100,000	4,700,000
Cash	780,000	900,000

19,180,000 19,200,000

Ordinary Shares	US$ 5,000,000	US$ 5,000,000
Retained Earnings	7,480,000	7,000,000
Bonds Payable - due Dec 31, Year 6	4,800,000	4,800,000
Current Liabilities	1,900,000	2,400,000

19,180,000 19,200,000

Income Statement

For the Year Ended December 31, year 2

Sales

US$ 30,000,000

Cost of Purchases. 23,400,000

Change in Inventory. 600,000

Depreciation Expenses. 700,000

Other Expenses. 3,800,000

28,500,000

Profit US$ 1,500,000

Additional Information:
1. Exchange Rates
December 31, Year 1	US$1 = CAD$1.10
September 30, Year 2	US$1 = CAD$1.07
December 31, Year 2	US$1 = CAD$1.05
Average for the Year 2	US$1 = CAD$1.08
2.SC declared and paid dividends on September 30, Year 2
3. Inventories on hand on December 31, Year 2, were purchased when the exchange rte was US$1 = CDN $1.06

Required:

1. Assume that SC's functional currency is the Canadian dollar.

Calculate the Year 2 exchange gain (loss) that would result from the

translation of SC's financial Statements.(4 Marks)

Calculate the dollar amount of the following items on SC's translated

financial Statements December 31, Year 2:

Inventory (1 Mark)

Plant and Equipment (1 Mark)

Accounts Receivable (1 Mark)

Ordinary Shares (1 Mark)

Retained Earnings (5 marks)

2. Assume that SC's functional currency is the US Dollar.

Calculate the Year 2 exchange gain (loss) that would result from

the translation of SC's financial Statements that would be reported

in Other Comprehensive Income (OCI).(3 Marks)

Calculate the dollars amount for the following items on SC's

translated financial Statements December 31 Year 2: 1. Cost of Good Sold (1 Mark) 2. Depreciation Expense (1Mark) 3. Accounts Receivable (1 Mark)

4. Plant and Equipment (net) (1 Mark) 5. Shareholder's Equity (4 Marks)