On December 31, Year 1, Precision Manufacturing Inc. (PMI) of Edmonton purchased 100% of the outstanding ordinary shares of Sandora Corp. of Flint, Michigan. Sandora's comparative statement of financial position and Year 2 income statement are as follows: STATEMENT OF FINANCIAL POSITION At December 31 Year 2 Plant and equipment (net) US$ 6,600,000 Inventory 5,700,000 Accounts receivable 6,100,000 Cash 780,000 US$19, 180,000 Ordinary shares US$ 5,000,000 Retained earnings 7,480,000 Bonds payable-due Dec. 31, Year 6 4,800,000 Current liabilities 1,900,000 US$19, 180,000 Year 1 US$ 7,300,000 6,300,000 4,700,000 900,000 US$19, 200,000 US$ 5,000,000 7,000,000 4,800,000 2,400,000 US$19, 200,000 INCOME STATEMENT For the year ended December 31, Year 2 Sales US$30,000,000 Cost of purchases 23,400,000 Change in inventory 600,000 Depreciation expense 700,000 Other expenses 3,800,000 28,500,000 Profit US$ 1,500,000 Additional Information Exchange rates Dec. 31, Year 1 Sep. 30, Year 2 Dec. 31, Year 2 Average for Year 2 US$1 = C$1.10 US$1 = C$1.07 US$1 = C$1.05 US$1 = C$1.08 Sandora 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 US$1 = C$1.06. Required: (a) Assume that Sandora's functional currency is the Canadian dollar: (i) Calculate the Year 2 exchange gain (loss) that would result from the translation of Sandora's financial statements. (Input all amounts as positive value. Omit currency symbol in your response.) (Click to select) C$ (ii) Translate the Year 2 financial statements into Canadian dollars. (Round the values in the "Rate" column to 2 decimal places. Exchange gain, if any, should be entered as positive value, and Exchange loss, if any, should be entered with a minus sign. Input all other amounts as positive values. Omit currency symbol in your response.) Income Statement-Year 2 Rate C$ Sales Cost of purchases Change in inventory Depreciation expense Other expenses (Click to select) US$ 30,000,000 x 23,400,000 x 600,000 700,000 x 3,800,000 x 28,500,000 1,500,000 (Click to select) C$ "Retained Earnings Statement-Year 2 US$ Rate Bal. Jan 1 7,000,000 x Profit 1,500,000 8,500,000 Dividends 1,020,000 X Bal. Dec 31 7,480,000 C$ Statement of Financial Position - December 31, Year 2 US$ Rate Plant and equipment (net) 6,600,000 x Inventory 5,700,000 X Accounts receivable 6,100,000 X Cash 780,000 X 19, 180,000 Ordinary shares 5,000,000 X Retained earnings 7.480,000 Bonds payable 4,800,000 X Current liabilities 1,900,000 X 19, 180,000 (b) Assume that Sandora's functional currency is the U.S. dollar: (i) Calculate the Year 2 exchange gain (loss) that would result from the translation of Sandora's financial statements and would be reported in other comprehensive income. (Input all amounts as positive value. Omit currency symbol in your response.) (Click to select) (ii) Translate the Year 2 financial statements into Canadian dollars. (Round the values in the "Rate" column to 2 decimal places. Loss amounts should be indicated with a minus sign. Input all other amounts as positive values. Omit currency symbol in your response.) Income Statement - Year 2 Rate C$ Sales Cost of purchases Change in inventory Depreciation expense Other expenses Total Profit Other comprehensive (Click to select) (Click to select) (Click to select) US$ 30,000,000 23,400,000 600,000 700,000 3,800,000 28,500,000 1,500,000 unrealized exchange DE Year 2 Rate C$ Retained Earnings Statement US$ Bal. Jan 1 7,000,000 X Profit 1,500,000 X 8,500,000 Dividends 1,020,000 x Bal. Dec 31 7,480,000 Rate C$ Statement of Financial Position - December 31, Year 2 US$ Plant and equipment (net) 6,600,000 Inventory 5,700,000 X Accounts receivable 6,100,000 x Cash 780,000 19, 180,000 Ordinary shares 5,000,000 x Retained earnings 7,480,000 Accumulated foreign exchange adjustments Bonds payable 4,800,000 x Current liabilities 1,900,000 X 19, 180,000 (c) Which functional currency would Sandora prefer to use if it wants to show the following? (i) The strongest solvency position for the company. Functional currency is Canadian dollar. O Functional currency is U.S. dollar and accumulated foreign exchange adjustments (AFEA) are included in equity. O Functional currency is U.S. dollar and accumulated foreign exchange adjustments (AFEA) are excluded from equity. (ii) The best return on shareholders' equity. Functional currency is Canadian dollar. Functional currency is U.S. dollar and other comprehensive income (OCI) is included in income. O Functional currency is U.S. dollar and other comprehensive income (OCI) is excluded income