QUESTION #$1(60$ Marks$)$

Poplar Tree Inc. $($PTI$)$ is a Canadian company. Its functional and reporting currency is the Canadian dollar. PTI purchased $100\%$ of the common shares of Spruce Tree Inc. $($STI$),$ a Belgium company, on December $31,2020.$

STI's comparative statement of financial position as at December $31,2023,$ and statement of comprehensive income for the year ended December $31,2023,$ follow, in Euros $(lon)$ :

Spruce Tree Inc.

Statement of financial position As at December $31$

Additional information:

Both companies report their financial results in accordance with IFRS and have acommon year end of December $31.$

STI's sales were made, and other expenses incurred, evenly throughout the year.

STI uses the FIFO cost formula to value its inventories.

STI purchased $2,100,000$ of inventory on January $1,2023,1,129,000$ of inventory on July $1,2023,$ and $1,008,000$ on December $15,2023.$ The closing inventory on December $31,2022,$ was purchased on December $31,2022.$

The plant, equipment and land assets reported on STI's statement of financial position as at December $31,2022,$ were all acquired on December $31,2019.$ STI purchased an additional $50,000$ of equipment on January $1,2023,$ and brought it into use on that date. All plant and equipment is depreciated on a straight$-$line basis over five years. These assets have no residual value for purposes of depreciation.

STI declared dividends on December $15,2023.$ The dividends were paid on December $31,2023.$

The Canadian dollar equivalent of STI's retained earnings as at December $31,2022,$ was $C$$$302,658.$

Significant exchange rates:

December $31,2019$

December $31,2020$

December $31,2021$

December $31,2022$

January $1,2023$

July $1,2023$

December $15,2023$

December $31,2023$

Average rate for $2022$

Average rate for $2023$

Part $1$:

Assume that STI's functional currency is the Canadian dollar.

a$)$ Calculate the foreign exchange gain or loss on STI's monetary items for $2023$ and make note of whether it is a gain or a loss. $(10$ marks$)$

b$)$ Translate STI's statement of comprehensive income for the year ended December $31,2023.(8$ marks$)$

c$)$ Reconcile the change in STI's translated retained earnings for the year ended December $31,2023.(2$ marks$)$

d$)$ Translate STI's statement of financial position as at December $31,2023.(5$ marks$)$

Part $2$:

Assume that STI's functional currency is the euro. The balance in the cumulative translation adjustment account included in accumulated other comprehensive income $($AOCI$)$ as at December $31,2022,$ was a credit of C $$43,200.$

a$)$ Calculate the foreign exchange gain or loss on STI's net assets for $2023$ and make note of whether it is a gain or a loss. $(5$ marks$)$

b$)$ Translate STI's statement of comprehensive income for the year ended December $31,2023.(5$ marks$)$

c$)$ Reconcile the change in STI's translated retained earnings for the year ended December $31,2023.(2$ marks$)$

d$)$ Translate STI's statement of financial position as at December $312023.$ Providea reconciliation of the cumulative translation adjustment figure. $(13$ marks$)$