Question
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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