On December 31, 20X14, Pride Company of Vancouver acquired 100% of the outstanding shares of Soul Company of Switzerland for CHF300,000. On this date, the fair values of Soul€™s identifiable assets and liabilities were equal to their carrying value. Soul€™s statements of financial position as at December 31, 20X14, and December 31, 20X15, and Soul€™s 20X15 statement of comprehensive income and retained earnings follow.

Soul Co.
Statement of Comprehensive Income and Retained Earnings
Year Ended December 31, 20X15

Sales CHF........................................................................................................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, 20X5............................................................125,000
.........................................................................................................................200,000
Dividends paid...............................................................................................(30,000)
Retained earnings, December 31, 20X5.............................................CHF 170,000

Additional Information

1. Inventory on hand 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 CHF450,000 on January 1, 20X8, the date of Soul€™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 Soul€™s sales prices, which are largely determined by local competition. Foreign exchange rates were as follows:

January 1, 20X8...........................................................................CHF1 = C$0.66
January 1, 20X10.........................................................................CHF1 = C$0.76
December 31, 20X14/January 1, 20X15....................................CHF1 = C$0.86
July 1, 20X15.................................................................................CHF1 = C$0.92
September 30, 20X15.................................................................CHF1 = C$0.94
December 31, 20X15..................................................................CHF1 = C$0.96
Average for October€“December 20X14...................................CHF1 = C$0.84
Average for October€“December 20X15...................................CHF1 = C$0.95
Average for 20X15.......................................................................CHF1 = C$0.91

Required
a. Determine Soul€™s functional currency. State three facts from the problem to support your conclusion.

b. Ignore your answer in part a) and assume that Soul€™s functional currency is the Canadian dollar. Translate the statement of comprehensive income and the statement of financial position for the year ended December 31, 20X15, to Canadian dollars. Include an independent calculation of any translation gains/losses.

c. Ignore your answers to parts a) and b) and assume that Soul€™s functional currency is the Swiss franc. Translate the statement of comprehensive income and the statement of financial position for the year ended December 31, 20X15, to Canadian dollars. Include an independent calculation of any translation gains/losses that Pride must include in its consolidated statements.

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Soul Co. Statement of Financial Position December 31 20X15 20X14 Assets CHF 80,000 Cash CHF 60,000 Accounts receivable 140,000 80,000 80,000 Inventory 110,000 250,000 280,000 Equipment, net CHF 580,000 CHF 500,000 Liabilities and shareholders' equity Accounts payable Bonds payable CHF 150,000 CHF 115,000 120,000 120,000 Common shares 140,000 140,000 Retained earnings 170,000 125,000 CHF 580,000 CHF 500,000