Question 1 (15 marks) On December 31, 2018, Powell Corp. (Powell), a Canadian public company, purchased 80% of the outstanding common shares of Setia Ltd. (Setia) for 9,500,000. Setia was incorporated in France. The condensed financial statements for Setia for 2019 and 2020 are as follows: Setia Ltd. Statement of financial position As at December 31 2020 2019 Monetary assets 5,005,000 2,305,000 Inventory 4,250,000 4,500,000 Equipment net 7,500,000 9,375,000 16,755,000 16,180,000 Monetary liabilities 9,125,000 8,875,000 Common shares 1,250,000 1,250,000 Retained earnings 6,380,000 6,055,000 16,755,000 16,180,000 Setia Ltd. Statement of comprehensive income For the year ended December 31, 2020 Sales 29,400,000 Cost of sales (18,500,000) Depreciation expense (1,875,000) Other expenses (8,075,000) Net income and comprehensive income 950,000 Additional information: The inventory at December 31, 2019, was purchased evenly throughout the fourth quarter (Q4) in 2019, and the inventory at December 31, 2020, was purchased evenly over Q4 in 2020. The equipment was purchased for 15,000,000 on January 1, 2017. It is being depreciated on a straight-line basis over eight years. Sales and other expenses occurred evenly throughout the year. Advanced Financial Reporting Page 2 Copyright 2021 Chartered Professional Accountants of Canada. All rights reserved. (CONTINUED ON PAGE 3) Dividends were declared on December 15, 2020, and paid on December 31, 2020. The exchange rates were as follows: January 1, 2017 1 = $1.65 December 31, 2018 1 = $1.42 Average for Q4 for 2019 1 = $1.37 December 31, 2019 1 = $1.35 December 15, 2020 1 = $1.32 Average for Q4 for 2020 1 = $1.30 Average for 2020 1 = $1.31 December 31, 2020 1 = $1.28 Required: a) Assume that Setias functional currency is the Canadian dollar. Calculate the following amounts that would appear on the translated financial statements of Setia: i. cost of goods sold for the year ended December 31, 2020 (3 marks) ii. depreciation expense for the year ended December 31, 2020 (1 mark) iii. translation gain or loss for the year ended December 31, 2020 (5 marks) b) Assume that Setias functional currency is the euro. Calculate the following amounts that would appear on the translated financial statements of Setia: i. cost of goods sold for the year ended December 31, 2020 (1 mark) ii. common shares as at December 31, 2020 (1 mark) iii. the foreign exchange gain or loss for the year ended December 31, 2020 (and explain how this foreign exchange gain or loss would be classified on the statement of comprehensive income) (4 marks