Question:

Para Corp. purchased a controlling interest in Aurora Inc. on December 31, 20X5. Net identifiable assets were equal to their book values on this date. Aurora operates in Italy, where the currency is the euro. In preparation for the consolidation process, the financial statements of Aurora need to be translated into Canadian dollars, and the appropriate translation gain or loss calculated. Below are Aurora's financial statements for the year ended December 31, 20X6: Aurora Inc. Statement of financial position As at December 31 20X6 20X5 Cash 100,000 84,000 Accounts receivable 375,000 400,000 Inventory 250,000 225,000 Property, plant, and equipment net 1,102,000 945,000 Total assets 1,827,000 1,654,000 Accounts payable 309,000 288,000 Bank loan 210,000 190,000 Total liabilities 519,000 478,000 Common shares 1,000,000 1,000,000 Retained earnings 308,000 176,000 Total liabilities and equity 1,827,000 1,654,000 Aurora Inc. Statement of comprehensive income Year ended December 31, 20X6 Sales 4,125,000 Cost of goods sold 2,475,000 Gross margin 1,650,000 Selling, general, and administrative expenses 1,235,000 Net income before tax 415,000 Income tax expense 103,750 Net income 311,250 Foreign exchange rates Average last quarter of 20X5 1 = C$1.39 December 31, 20X5 1 = C$1.37 December 15, 20X6 1 = C$1.33 December 31, 20X6 1 = C$1.35 Average rate 20X6 1 = C$1.36 Average last quarter of 20X6 1 = C$1.34 Advanced Financial Reporting Week 5 Quiz 4 / 6 Additional information: Inventory purchases were made evenly throughout the year. Ending/beginning inventories are purchased evenly throughout the last quarter of each year. Depreciation of 143,000 is included in selling, general, and administrative expenses. Equipment was purchased on December 31, 20X6, using 300,000 cash. Dividends declared and paid (December 15) totalled 179,250.

Assuming that Aurora's functional currency is the euro, what is the amount of translation gain or loss that arises in 20X6?

a) $30,217 loss

b) $26,632 loss

c) $21,537 loss

d) $154,680 gain

PLEASE ANSWER AND SHOW THE SOLUTIONS. THANK YOU VERY MUCH!