Reference no: EM133139932

Question - ABC Inc. has a single wholly-owned American subsidiary called US1 based in Los Angeles, California, which was acquired January 1, 2020. US1 submitted its financial statements for 2020 to ABC. Selected exchange rates in effect throughout 2020 are shown below:

January 1, 2020: US $1 = CDN $0.815

December 31, 2020: US $1 = CDN $0.8175

Average for 2020: US $1 = CDN $0.825

Date of Purchase of Inventory on Hand: US $1 = CDN $0.83

Date Dividends were declared: US $1 = CDN $0.8125

US1 financial results for 2020 were as follows:

US1 Financial Statements at December 31, 2020 (in U.S. dollars)

Income Statement:

Sales $5,000,000

Cost of Sales $3,500,000

Depreciation Expense $150,000

Bond Interest Expense $100,000

Other Expense $750,000

Net Income $500,000

Statement of Retained Earnings:

January 1, 2020: $400,000

Net Income $500,000

Dividends ($100,000)

December 31, 2020: $800,000

Balance Sheet

Cash $1,200,000

Accounts Receivable $1,900,000

Inventory $700,000 ($500,000 January 1, 2020)

Plant and Equipment (net) $400,000

$4,200,000

Current Liabilities $400,000

Bonds Payable $2,000,000

Common Shares $1,000,000

Retained Earnings $800,000

$4,200,000

Sales, purchases, bond interest, and other expenses occurred evenly throughout the year.

US1 is considered to be a foreign subsidiary that has the same functional currency as ABC Inc.'s functional currency.

Assuming the net monetary assets where US$350,000 on January 1, 2020, what is the amount of the 2020 exchange gain (loss) that would result from the translation of US1's financial statements?