Terra Limited is located in Brazil and was incorporated on January $1,2020.$ Terra issued no$-$par common shares for $$6\mathrm{.}0$ million Brazilian reals $($R$).$ Terra immediately purchased plant and equipment for R$4\mathrm{.}0$ million. The plant and equipment are being depreciated on a straight$-$line basis over a $10-$year life.

On January $1,2023,$ Davis Inc. $($Davis$)$ acquired $90\%$ of the shares of Terra Limited $($Terra$)$ for $$7\mathrm{.}0$ Brazilian reals $($R$).$ The exchange rate on the acquisition date was R$1=$ CDN$$0\mathrm{.}23.$

The financial statements for Terra on December $31,2023$ are as follows:

Terra Financial Statements

at December $31,2023$

$($in reals$)$

Income Statement:

Sales R$5,500,000$

Cost of goods sold $2,500,000$

Depreciation expense $400,000$

Bond interest expense $100,000$

Other expense $750,000$

Net income R$1,750,000$

Statement of Retained Earnings:

January $1,2023$ R$2,400,000$

Net Income $1,750,000$

Dividends $(500,000)$

December $31,2023$ R$3,650,000$

Balance Sheets

December $31,2023$ December $31,2022$

Cash R$2,200,000$ R $500,000$

Accounts receivable $2,600,0002,550,000$

Inventory $3,850,0003,750,000$

Plant and equipment $4,000,0004,000,000$

Accumulated depreciation $(1,600,000)(1,200,000)$

R$11,050,000$ R$9,600,000$

Current liabilities R $400,000$ R$200,000$

Bonds payable $1,000,0001,000,000$

Common shares $6,000,0006,000,000$

Retained earnings $3,650,0002,400,000$

R$11,050,000$ R$9,600,000$

Selected exchange rates are shown below:

January $1,2020$ R$1=$ CDN$$0\mathrm{.}185$

January $1,2023$: R$1=$ CDN$$0\mathrm{.}23$

December $31,2023$: R$1=$ CDN$$0\mathrm{.}217$

Average for $2023$: R$1=$ CDN$$0\mathrm{.}2145$

Date of purchase of inventory on hand at December $31,2023$: R$1=$ CDN$$0\mathrm{.}225$

Date dividends were declared and paid: R$1=$ CDN$$0\mathrm{.}248$

Other information:

$$ Sales, purchases, bond interest, and other expenses occurred evenly throughout the year.

$$ There were no additions or disposals of plant and equipment in $2023$

$$ Terra's functional currency is the Canadian dollar.

Which of the following is the correct translated amount of cost of goods sold?

Multiple Choice

$$542,500$

$$562,500$

$$536,250$

$$553,950$