P11-6:

a) Functional currency of Sandora is the Canadian dollar: therefore, same as PMI (P

and therefore, the FCT method should be used.

i) Net translation adjustment is based on the exposed exchage rate risk position.
With monetary items being tramslation at closing rate each B/S date, the net mo

Net monetary position:

Cash
A/R
Current liabilities
Bonds payable
Net assets/(liability) position

Net monetary assets - beginning of year

Changes during year 2:
Sales
Cost of purchases
Other expenses
Dividends:
End R/E
N.I.
Beg R/E
Calculated net monetary assets - end of year
Actual net monetary assets - end of year
Net exchange loss (reported in N.I.)

ii) F/S Translation: start with I/S, then Stmt of R/E or Stmnt of Changes in Equity, th

Income Statement

Sales
Cost of purchases
Change in Inventory
Depreciaiton expense
Other expense
Exchange Loss
 Net Income

*****: Change in Inventory:

Beginning Inventory
Ending Inventory

Statement of Retained Earnings

Retained earnings, January 1, Year 2

Net Income
Dividends
Retained earnings, December 31, Year 2

Satatement of Financial position

Cash
Accounts Receivable
Inventory
Plant and equipment (net)

Current liabilities
Bonds Payable
Ordinary shares
Retained earnings

b) Sandaora's functional currency is the U.S. $: therefore, different from PMI (paren
requires use of the PCT method to translation gain/loss, since all assets and liab

Net assets, beginning of Year 2: (5,190,000+7,190,000)

Change in year 2:
Net income
Dividends
Calculated net assets, end of year 2
Actucal net assets, end of year 2
Translation adjustment/Exchange gain/(loss)

Income Statement

Sales
Cost of purchases
Change in Inventory
Depreciaiton expense
Other expense

Net Income
OCI - unrealized exchange loss
Comprehensive net income

Statement of Retained Earnings

Retained earnings, January 1, Year 2

Net Income
Dividends
Retained earnings, December 31, Year 2

Satatement of Financial position

Cash
Accounts Receivable
Inventory
Plant and equipment (net)

Current liabilities
Bonds Payable
Ordinary shares
Retained earnings
Accumulated OCI - exchange adjustment
re, same as PMI (Parent)

ate risk position.

S date, the net montery position dictates the translation gain or loss.

Yr2 Yr1
970,000 1,090,000
6,290,000 4,890,000
(2,090,000) (2,590,000)
(4,990,000) (4,990,000)
180,000 (1,600,000)

U.S. $ Each. CDN $

(1,600,000) 1.10 (1,760,000)

49,000,000 1.08 52,920,000

(38,220,000) 1.08 (41,277,600)
(6,270,000) 1.08 (6,771,600)

7,670,000
(3,210,000)
(7,190,000) (2,730,000) 1.07 (2,921,100)
189,700
180,000 1.05 189,000
(700)

nges in Equity, then B/S…

U.S. $ Each. CDN $

49,000,000 1.08 52,920,000

38,220,000 1.08 41,277,600
600,000 calcu*** 895,600
700,000 1.10 770,000
6,270,000 1.08 6,771,600
700
45,790,000 49,715,500
 3,210,000 3,204,500

6,490,000 1.10 7,139,000

(5,890,000) 1.06 (6,243,400)
600,000 895,600

U.S. $ Each. CDN $

7,190,000 1.10 7,909,000

3,210,000 3,204,500
(2,730,000) 1.07 (2,921,100)
7,670,000 8,192,400

U.S. $ Each. CDN $

970,000 1.05 1,018,500

6,290,000 1.05 6,604,500
5,890,000 1.06 6,243,400
6,790,000 1.10 7,469,000
19,940,000 21,335,400

2,090,000 1.05 2,194,500

4,990,000 1.05 5,239,500
5,190,000 1.10 5,709,000
7,670,000 8,192,400
19,940,000 21,335,400

nt from PMI (parent), which

all assets and liabilities translated at closing rate each B/S date.

U.S. $ Each. CDN $

12,380,000 1.10 13,618,000

3,210,000 1.08 3,466,800

(2,730,000) 1.07 (2,921,100)
14,163,700
12,860,000 1.05 13,503,000
 (660,700)

U.S. $ Each. CDN $

49,000,000 1.08 52,920,000

38,220,000 1.08 41,277,600
600,000 1.08 648,000
700,000 1.08 756,000
6,270,000 1.08 6,771,600
45,790,000 49,453,200
3,210,000 3,466,800
(660,700)
3,210,000 2,806,100

U.S. $ Each. CDN $

7,190,000 1.10 7,909,000

3,210,000 3,466,800
(2,730,000) 1.07 (2,921,100)
7,670,000 8,454,700

U.S. $ Each. CDN $

970,000 1.05 1,018,500

6,290,000 1.05 6,604,500
5,890,000 1.05 6,184,500
6,790,000 1.05 7,129,500
19,940,000 20,937,000

2,090,000 1.05 2,194,500

4,990,000 1.05 5,239,500
5,190,000 1.10 5,709,000
7,670,000 8,454,700
(660,700)
19,940,000 20,937,000
average rate
P11-6:

a) Functional currency of Sandora is the Canadian dollar: therefore, same as PMI (P

and therefore, the FCT method should be used.

i) Net translation adjustment is based on the exposed exchage rate risk position.
With monetary items being tramslation at closing rate each B/S date, the net mo

Net monetary position:

Cash
A/R
Current liabilities
Bonds payable
Net assets/(liability) position

Net monetary assets - beginning of year

Changes during year 2:
Sales
Cost of purchases
Other expenses
Dividends:
End R/E
N.I.
Beg R/E
Calculated net monetary assets - end of year
Actual net monetary assets - end of year
Net exchange loss (reported in N.I.)

ii) F/S Translation: start with I/S, then Stmt of R/E or Stmnt of Changes in Equity, th

Income Statement

Sales
Cost of purchases
Change in Inventory
Depreciaiton expense
Other expense
Exchange Loss
 Net Income

*****: Change in Inventory:

Beginning Inventory
Ending Inventory

Statement of Retained Earnings

Retained earnings, January 1, Year 2

Net Income
Dividends
Retained earnings, December 31, Year 2

Satatement of Financial position

Cash
Accounts Receivable
Inventory
Plant and equipment (net)

Current liabilities
Bonds Payable
Ordinary shares
Retained earnings

b) Sandaora's functional currency is the U.S. $: therefore, different from PMI (paren
requires use of the PCT method to translation gain/loss, since all assets and liab

Net assets, beginning of Year 2: (5,190,000+7,190,000)

Change in year 2:
Net income
Dividends
Calculated net assets, end of year 2
Actucal net assets, end of year 2
Translation adjustment/Exchange gain/(loss)

Income Statement

Sales
Cost of purchases
Change in Inventory
Depreciaiton expense
Other expense

Net Income
OCI - unrealized exchange loss
Comprehensive net income

Statement of Retained Earnings

Retained earnings, January 1, Year 2

Net Income
Dividends
Retained earnings, December 31, Year 2

Satatement of Financial position

Cash
Accounts Receivable
Inventory
Plant and equipment (net)

Current liabilities
Bonds Payable
Ordinary shares
Retained earnings
Accumulated OCI - exchange adjustment
re, same as PMI (Parent)

ate risk position.

S date, the net montery position dictates the translation gain or loss.

Yr2 Yr1
970,000 1,090,000
6,290,000 4,890,000
(2,090,000) (2,590,000)
(4,990,000) (4,990,000)
180,000 (1,600,000)

U.S. $ Each. CDN $

(1,600,000) 1.10 (1,760,000)

49,000,000 1.08 52,920,000

(38,220,000) 1.08 (41,277,600)
(6,270,000) 1.08 (6,771,600)

7,670,000
(3,210,000)
(7,190,000) (2,730,000) 1.07 (2,921,100)
189,700
180,000 1.05 189,000
700

nges in Equity, then B/S…

U.S. $ Each. CDN $

49,000,000 1.08 52,920,000

38,220,000 1.08 41,277,600
600,000 895,600
700,000 1.10 770,000
6,270,000 1.08 6,771,600
700
45,790,000 49,715,500
 3,210,000 3,204,500

6,490,000 1.10 7,139,000

(5,890,000) 1.06 (6,243,400)
600,000 895,600

U.S. $ Each. CDN $

7,190,000 1.10 7,909,000

3,210,000 3,204,500
(2,730,000) 1.07 (2,921,100)
7,670,000 8,192,400

U.S. $ Each. CDN $

970,000 1.05 1,018,500

6,290,000 1.05 6,604,500
5,890,000 1.06 6,243,400
6,790,000 1.10 7,469,000
19,940,000 21,335,400

2,090,000 1.05 2,194,500

4,990,000 1.05 5,239,500
5,190,000 1.10 5,709,000
7,670,000 8,192,400
19,940,000 21,335,400

nt from PMI (parent), which

all assets and liabilities translated at closing rate each B/S date.

U.S. $ Each. CDN $

12,380,000 1.10 13,618,000

3,210,000 1.08 3,466,800

(2,730,000) 1.07 (2,921,100)
14,163,700
12,860,000 1.05 13,503,000
 (660,700)

U.S. $ Each. CDN $

49,000,000 1.08 52,920,000

38,220,000 1.08 41,277,600
600,000 1.08 648,000
700,000 1.08 756,000
6,270,000 1.08 6,771,600
45,790,000 49,453,200
3,210,000 3,466,800
(660,700)
3,210,000 2,806,100

U.S. $ Each. CDN $

7,190,000 1.10 7,909,000

3,210,000 3,466,800
(2,730,000) 1.07 (2,921,100)
7,670,000 8,454,700

U.S. $ Each. CDN $

970,000 1.05 1,018,500

6,290,000 1.05 6,604,500
5,890,000 1.05 6,184,500
6,790,000 1.05 7,129,500
19,940,000 20,937,000

2,090,000 1.05 2,194,500

4,990,000 1.05 5,239,500
5,190,000 1.10 5,709,000
7,670,000 8,454,700
(660,700)
19,940,000 20,937,000
average rate
a)
i) Net monotary: Yr2 Yr1
Cash 970,000 1,090,000
A/R 6,290,000 4,890,000
C/L (2,090,000) (2,590,000)
B/P (4,990,000) (4,990,000)
Net monotary 180,000 (1,600,000)

Beginning Net monotary

Add: Changes in Yr 2
Sales
Cost of purchase
Other expense
Less: Dividend
End R/E 7,670,000
-N/I (3,210,000)
-Beg R/E (7,190,000)
Calculated Net monotary
Actual Net monotary
Exchange loss

ii) Income Statement

Sales
Cost of purchases
Change in inventory
Depreciation expense
Other expense
Exchange loss

Net Income

Change in inventory:
Beginning inventory
Less: Ending inventory

Retained earnings:
Beg
Add: Net income
 Less: Dividend
Ending R/E

Balance Sheet:

Cash
A/R
Inventory
Plant and equipment

C/L
B/P
Ordinary shares
Retained earnings

b)
i) Net assets begging
Add: Changes in Yr2
Net income
-Dividend
Claculated ending net assets
Actual ending net assets
Exchange loss

Income Statement

Sales
Cost of purchases
Change in inventory
Depreciation expense
Other expense
Exchange loss

Net Income
Accumulated OCI - exchange loss
Comprehensive net income
Retained earnings:
Beg
Add: Net income
Less: Dividend
Ending R/E

Balance Sheet:

Cash
A/R
Inventory
Plant and equipment

C/L
B/P
Ordinary shares
Retained earnings
Accumulated OCI - exchange loss
U.S.$ Each. CDN$
(1,600,000) 1.10 (1,760,000)

49,000,000 1.08 52,920,000

(38,220,000) 1.08 (41,277,600)
(6,270,000) 1.08 (6,771,600)

(2,730,000) 1.07 (2,921,100)

189,700
180,000 1.05 189,000
700

U.S.$ Each. CDN$

49,000,000 1.08 52,920,000
38,220,000 1.08 41,277,600
600,000 895,600
700,000 1.10 770,000
6,270,000 1.08 6,771,600
700
45,790,000 49,715,500
3,210,000 3,204,500

6,490,000 1.10 7,139,000

(5,890,000) 1.06 (6,243,400)
600,000 895,600

7,190,000 1.10 7,909,000

3,210,000 3,204,500
 (2,730,000) 1.07 (2,921,100)
7,670,000 8,192,400

970,000 1.05 1,018,500

6,290,000 1.05 6,604,500
5,890,000 1.06 6,243,400
6,790,000 1.10 7,469,000
19,940,000 21,335,400

2,090,000 1.05 2,194,500

4,990,000 1.05 5,239,500
5,190,000 1.10 5,709,000
7,670,000 8,192,400
19,940,000 21,335,400

12,380,000 1.10 13,618,000

3,210,000 1.08 3,466,800

(2,730,000) 1.07 (2,921,100)
12,860,000 14,163,700
12,860,000 1.05 13,503,000
660,700

U.S.$ Each. CDN$

49,000,000 1.08 52,920,000
38,220,000 1.08 41,277,600
600,000 1.08 648,000
700,000 1.08 756,000
6,270,000 1.08 6,771,600
-
45,790,000 49,453,200
3,210,000 3,466,800
660,700
2,806,100
 7,190,000 1.10 7,909,000
3,210,000 3,466,800
(2,730,000) 1.07 (2,921,100)
7,670,000 8,454,700

970,000 1.05 1,018,500

6,290,000 1.05 6,604,500
5,890,000 1.05 6,184,500
6,790,000 1.05 7,129,500
19,940,000 20,937,000

2,090,000 1.05 2,194,500

4,990,000 1.05 5,239,500
5,190,000 1.10 5,709,000
7,670,000 8,454,700
(660,700)
19,940,000 20,937,000