On December 31, 20X14, Pepper Company of Winnipeg acquired 100% of the outstanding shares of Salt Company of Switzerland. On this date, the fair values of Salt€™s identifiable assets and liabilities were equal to their carrying value. Salt€™s statements of financial position as at December 31, 20X14, and December 31, 20X15, and Salt€™s 20X15 statement of comprehensive income and retained earnings follow:
Salt Co.
Statement of Financial Position
December 31

Salt Co.
Statement of Comprehensive Income and Retained Earnings
Year ended December 31, 20X15
Sales..................................................................................................................... SF 850,000
Cost of sales......................................................................................................... (500,000)
Gross margin.......................................................................................................... 350,000
Amortization expense............................................................................................ (30,000)
Other expenses....................................................................................................... (245,000)
Net income............................................................................................................ 75,000
Retained earnings, January 1, 20X15...................................................................... 125,000
................................................................................................................................ 200,000
Dividends paid.......................................................................................................... (30,000)
Retained earnings, December 31, 20X15................................................................SF 170,000
Additional Information
1. Inventory on hand as at December 31, 20X14, and December 31, 20X15, was purchased evenly over the final three months of 20X14 and 20X15, respectively, from suppliers in Switzerland. Sales and purchases occurred evenly throughout the year.
2. The plant and equipment on hand at December 31, 20X14, was originally acquired for SF450,000 on January 1, 20X8, the date of Salt€™s incorporation. No plant and equipment was acquired or sold during fiscal 20X15.
3. Dividends were declared and paid on September 30, 20X15.
4. The bonds were issued on January 1, 20X10, and mature on December 31, 20X19. The Swiss franc has changed over time relative to the Canadian dollar, but the foreign exchange trend has little effect on Salt€™s sales prices, which are largely determined by local competition. Foreign exchange rates were as follows:
January 1, 20X8.............................................................................................. SF1 = C$ 0.66
January 1, 20X10.............................................................................................. SF1 = C$ 0.76
December 31, 20X14/ January 1, 20X15.......................................................... SF1 = C$ 0.86
July 1, 20X15..................................................................................................... SF1 = C$ 0.92
September 30, 20X15........................................................................................ SF1 = C$ 0.94
December 31, 20X15........................................................................................ SF1 = C$ 0.96
Average for October€“December 20X14.......................................................... SF1 = C$ 0.84
Average for October€“December 20X15........................................................... SF1 = C$ 0.95
Average for 20X15............................................................................................ SF1 = C$ 0.91

Required
1. Determine Salt€™s functional currency. State three facts from the problem to support your conclusion.
2. Ignore your answer in part 1 and assume that Salt€™s functional currency is the Canadian dollar. Translate the statement of comprehensive income and retained earnings for the year ended December 31, 20X15, to Canadian dollars. Include an independent calculation of any exchange gains/ losses.
3. Ignore your answers to parts 1 and 2 and assume that Salt€™s functional currency is the Swiss franc. Calculate the cumulative translation adjustment on its December 31, 20X15, translatedSFP.

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20X1520X14 Assets Cash Accounts receivable Inventory Equipment net SF 80,000 140,000 110,000 SF 60,000 80,000 80,000 Liabilities and shareholders Accounts payable Bonds payable Common shares Retained eamings equity SF 150,000 SF115,000 120,000 140,000 120,000 140,000 F 580 500