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On December 31, Year 1, Precision Manufacturing Inc. (PMI) of Edmonton purchased 100% of the outstanding ordinary shares of Sandora Corp. of Flint, Michigan. Sandoras

On December 31, Year 1, Precision Manufacturing Inc. (PMI) of Edmonton purchased 100% of the outstanding ordinary shares of Sandora Corp. of Flint, Michigan. Sandoras comparative statement of financial position and Year 2 income statement are as follows:

STATEMENT OF FINANCIAL POSITION
At December 31
Year 2 Year 1
Plant and equipment (net) US$ 6,600,000 US$ 7,300,000
Inventory 5,700,000 6,300,000
Accounts receivable 6,100,000 4,700,000
Cash 780,000 900,000
US$ 19,180,000 US$ 19,200,000
Ordinary shares US$ 5,000,000 US$ 5,000,000
Retained earnings 7,480,000 7,000,000
Bonds payabledue Dec. 31, Year 6 4,800,000 4,800,000
Current liabilities 1,900,000 2,400,000
US$ 19,180,000 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 US$1 = C$1.10
Sep. 30, Year 2 US$1 = C$1.07
Dec. 31, Year 2 US$1 = C$1.05
Average for Year 2 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.

a) 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.)

Choose- Exchange gain / Exchange loss C$ ??????

(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
US$ Rate C$
Sales 30,000,000
Cost of purchases 23,400,000
Change in inventory 600,000
Depreciation expense 700,000
Other expenses 3,800,000
Total 28,500,000
Profit 1,500,000
Other comprehensive (Click to select) income loss unrealized exchange (Click to select) gain loss
(Click to select) Comprehensive income Comprehensive loss

Retained Earnings Statement - Year 2
US$ Rate C$
Bal. Jan 1 7,000,000
Profit 1,500,000
8,500,000
Dividends 1,020,000
Bal. Dec 31 7,480,000

Statement of Financial Position - December 31, Year 2
US$ Rate C$
Plant and equipment (net) 6,600,000
Inventory 5,700,000
Accounts receivable 6,100,000
Cash 780,000
19,180,000
Ordinary shares 5,000,000
Retained earnings 7,480,000
Accumulated foreign exchange adjustments
Bonds payable 4,800,000
Current liabilities 1,900,000
19,180,000

Note- Only answer if you have proper knowledge about the question and I request you to answer all the parts of the question for a positive rating. Thanks

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