QUESTION #2(20 MARKS) The Y Company is a foreign subsidiary of the X Company. It was acquired on December 31st 2020. Y has been manufacturing computer parts and other retail items for over 100 years its sales prices are determined by the tough competitive market in Switzerland. The chief financial officer of Y has just faxed you the December 31st 2021 financial statements of Y, which are in Swiss Francs(SF). Y COMPANY Balance Sheets December 31, 2021.................December 31,2020 Cash........ SF 200,000... SF 150,000 Accounts receivable.. 250,000.... 225,000 Inventory..... 400,000..... 430,000 Equipment, net... 1,350,000... 900,000 TOTAL ASSETS...... SF 2,200,000.. SF 1.705,000 Accounts Payable.. SF 310,000.. SF 355,000 Bonds Payable.... 5015000.... 500,000 Common shares. 1,100,000.... 600,000 Retained Earnings..... 290,000..... 250,000 Retained Earnings........... 290,000....... 250,000 TOTAL LIABILITIES & OWNERS' EQUITY........SF 2,200,000.... ..SF 1,705,000 Y COMPANY Statement of Income For Year Ended December 31,2021 Sales...... ..SF 2,800,000 Cost of Goods sold........ 2,300,000 Gross Profit.. 500,000 Selling and administrative expenses. 160,000 Bond interest expense...... 40,000 Amortization...... 150,000 Income before income tax expenses.... 150,000 Income Taxes. 50,000 Income Taxes...... 50,000 NET INCOME SF 100,000 Additional Information:- Exchange rates were as follows:- January 1,2016.. ..SF1.00=C$0.60 Average for October 1 to December 31,2020....... SF1.00=C$0.65 December 31,2020..... SF1.00=C$0.70 Average for 2021 SF1.00=C$0.74 July 1,2021. SF1.00=C$0.75 Average for October 1 to December 31,2021.. SF1.00=C$0.76 December 31,2021... ..SF1.00=C$0.78 December 31,2021. T SF1.00=C$0.80 ii. Y has been upgrading its equipment in recent years. On January 1st 2021, it disposed of all its old equipment and acquired SF 1,200,000 of new equipment with an expected useful life of 12 year On July 1st 2021, it acquired another SF600,000 of new equipment with an expected useful life of 6 years. Y amortizes all of its equipment on a straight-line basis, calculated monthly Y has been upgrading its equipment in recent years. On January 1st 2021, it disposed of all its old equipment and acquired SF 1,200,000 of new equipment with an expected useful life of 12 years. On July 1st 2021, it acquired another SF600,000 of new equipment with an expected useful life of 6 years. Y amortizes all of its equipment on a straight-line basis, calculated monthly III. Y partially financed its acquisition of equipment in 2016 by issuing SF500,000 of 10-year, 8% bonds payable in Switzerland on January 1, 2016. Similarly, Y partially financed its acquisition of equipment in 2021 by issuing SF500,000 of common shares in Switzerland on July 1,2021. iv. Inventory on hand on December 31st 2020 and December 31st 2021 were purchased from respected Swiss suppliers evenly over the last 3 months of 2020 and 2021. V. Dividends of SF60,000 were declared and paid on December 15th 2021. VI. All sales, purchases, and other expenses were incurred evenly during the year. Required:- a. Should Y Company's financial statements be translated into Canadian dollars using the current rate method or temporal method? State three facts from the question to support your answer(4 marks) b. Disregard your response to part (a) above and using the temporal method. provide a detailed calculation of the foreign exchange gain or loss(10marks). C. Disregard your responses to (a) and (b) above and translate the following accounts into Canadian dollars as at December 31st 2021, using the current rate method:- 1. Equipment (1 mark) li. Bonds Payable(1 mark) IN Cumulative translation adjustment (4 marks) QUESTION #3120 MARKSI:- QUESTION #2(20 MARKS) The Y Company is a foreign subsidiary of the X Company. It was acquired on December 31st 2020. Y has been manufacturing computer parts and other retail items for over 100 years its sales prices are determined by the tough competitive market in Switzerland. The chief financial officer of Y has just faxed you the December 31st 2021 financial statements of Y, which are in Swiss Francs(SF). Y COMPANY Balance Sheets December 31, 2021.................December 31,2020 Cash........ SF 200,000... SF 150,000 Accounts receivable.. 250,000.... 225,000 Inventory..... 400,000..... 430,000 Equipment, net... 1,350,000... 900,000 TOTAL ASSETS...... SF 2,200,000.. SF 1.705,000 Accounts Payable.. SF 310,000.. SF 355,000 Bonds Payable.... 5015000.... 500,000 Common shares. 1,100,000.... 600,000 Retained Earnings..... 290,000..... 250,000 Retained Earnings........... 290,000....... 250,000 TOTAL LIABILITIES & OWNERS' EQUITY........SF 2,200,000.... ..SF 1,705,000 Y COMPANY Statement of Income For Year Ended December 31,2021 Sales...... ..SF 2,800,000 Cost of Goods sold........ 2,300,000 Gross Profit.. 500,000 Selling and administrative expenses. 160,000 Bond interest expense...... 40,000 Amortization...... 150,000 Income before income tax expenses.... 150,000 Income Taxes. 50,000 Income Taxes...... 50,000 NET INCOME SF 100,000 Additional Information:- Exchange rates were as follows:- January 1,2016.. ..SF1.00=C$0.60 Average for October 1 to December 31,2020....... SF1.00=C$0.65 December 31,2020..... SF1.00=C$0.70 Average for 2021 SF1.00=C$0.74 July 1,2021. SF1.00=C$0.75 Average for October 1 to December 31,2021.. SF1.00=C$0.76 December 31,2021... ..SF1.00=C$0.78 December 31,2021. T SF1.00=C$0.80 ii. Y has been upgrading its equipment in recent years. On January 1st 2021, it disposed of all its old equipment and acquired SF 1,200,000 of new equipment with an expected useful life of 12 year On July 1st 2021, it acquired another SF600,000 of new equipment with an expected useful life of 6 years. Y amortizes all of its equipment on a straight-line basis, calculated monthly Y has been upgrading its equipment in recent years. On January 1st 2021, it disposed of all its old equipment and acquired SF 1,200,000 of new equipment with an expected useful life of 12 years. On July 1st 2021, it acquired another SF600,000 of new equipment with an expected useful life of 6 years. Y amortizes all of its equipment on a straight-line basis, calculated monthly III. Y partially financed its acquisition of equipment in 2016 by issuing SF500,000 of 10-year, 8% bonds payable in Switzerland on January 1, 2016. Similarly, Y partially financed its acquisition of equipment in 2021 by issuing SF500,000 of common shares in Switzerland on July 1,2021. iv. Inventory on hand on December 31st 2020 and December 31st 2021 were purchased from respected Swiss suppliers evenly over the last 3 months of 2020 and 2021. V. Dividends of SF60,000 were declared and paid on December 15th 2021. VI. All sales, purchases, and other expenses were incurred evenly during the year. Required:- a. Should Y Company's financial statements be translated into Canadian dollars using the current rate method or temporal method? State three facts from the question to support your answer(4 marks) b. Disregard your response to part (a) above and using the temporal method. provide a detailed calculation of the foreign exchange gain or loss(10marks). C. Disregard your responses to (a) and (b) above and translate the following accounts into Canadian dollars as at December 31st 2021, using the current rate method:- 1. Equipment (1 mark) li. Bonds Payable(1 mark) IN Cumulative translation adjustment (4 marks) QUESTION #3120 MARKSI