DNA Was Incorporated on January 2, 20X0, and Commenced Active

question 23

Essay

DNA was incorporated on January 2, 20X0, and commenced active operations immediately. Common shares were issued on the date of incorporation and no new common shares have been issued since then. On December 31, 20X3, INT purchased 70% of the outstanding common shares of DNA for 800,000 Swedish Krona (SEK).
DNA's main operations are located in Switzerland. For the year ending December 31, 20X6, the income statement (in 000s)for DNA was as follows:
$$\begin{array} { l l l } \text { Sales } & \text { SEK } & 1,625 \\\text { Cost of goods sold } & & ( 1,200 ) \\\text { Depreciation expense } & & ( 75 ) \\\text { Income tax expense-current } & & \underline {( 100 )} \\\text { Net income } & \text { SEK } & \underline { 250 }\end{array}$$ The comparative and condensed statements of financial position (in 000s)for DNA were as follows:
$$\begin{array} { l l l l l } & & 20 X 6 & & 20X 5 \\\text { Accounts receivable } & \text { SEK } & 400 & \text { SEK } & 385 \\\text { Inventory } & & 200 & & 90 \\\text { Property, plant, and equipment - net } && \underline { 1,750 } & & \underline { 1,825 } \\\text { Total } & \text { SEK } & \underline { 2,350 } & \text { SEK } & \underline { 2,300 }\end{array}$$ $\begin{array}{lll}\text { Accounts payable } & \text { SEK } & 90 & \text { SEK }&85\\\text { Other current monetary liabilities } & 200&&250 \\\text { Common shares } & & 1,250&&1,250 \\\text { Retained earnings (Note 3) } & \text { SEK } & \underline{810} &&\underline{715}\\\text { Total }& \text { SEK } &\underline{ 2,350}& \text { SEK }&\underline{2,300}\end{array}$
OTHER INFORMATION:
• Purchases and sales of merchandise inventory occurred evenly throughout the year.
• The ending inventory was purchased evenly throughout the last month of the year.
• DNA purchased the property, plant, and equipment on hand at the end of 20X6 on March 17, 20X1. There were no purchases or sales of these assets from 20X3 to 20X6.
• Dividends were paid on June 30, 20X6.
Assume that foreign exchange rates were as follows:
$\begin{array}{ll}\text { January } 2,20 \times 0 & \$ 1=\text { SEK } 2.30 \\\text { March } 17,20 \times 1 & \$ 1=\text { SEK } 2.60 \\\text { December } 31,20 \times 3 & \$ 1=\text { SEK } 2.70 \\\text { Average for } 20 \times 5 & \$ 1=\text { SEK } 2.90 \\\text { Average for quarter } 4 \text { for } 20 \times 5 & \$ 1=\text { SEK } 3.00 \\\text { Average for December } 20 \times 5 & \$ 1=\text { SEK } 3.10\\\text { December } 31,20 \times 5 & \$ 1=\text { SEK } 3.30 \\\text { June } 30,20 \times 6 & \$ 1=\text { SEK } 3.60 \\\text { Average for } 20 \times 6 & \$ 1=\text { SEK } 3.50 \\\text { Average for quarter } 4 \text { for } 20 \times 6 & \$ 1=\text { SEK } 3.70 \\\text { Average for December } 20 \times 6 & \$ 1=\text { SEK } 3.80 \\\text { December } 31.20 \times 6 & \$ 1=\text { SEK } 3.90\end{array}$
- DNA's financial statements need to be translated into Canadian dollars for consolidation with INT's financial statements.
Required:
Calculate the exchange gain/loss on current monetary items for 20X6 under the temporal method.

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