In 20X0, Canterra Company invested $1,500,00 CDN (600,000 FC) to establish a foreign subsidiary, Forterra Ltd.Forterra took out a $240,000 FC bank loan to help finance t he purchase of equipment and furniture. At the time the
loan was taken out, the exchange rate was 1FC=$2.40 CDN. The loan principal is not required to be repaid for five
years. Forterra purchased equipment costing 720,000 FC when the exchange was 1FC = 2.30 CDN
After a very successful first year of operations, Forterra decided to purchase a tract of land for 240,000 FC. The
exchange rate at the time of purchase was 1FC = 1.90 CDN. Forterra’s policy is to declare and pay dividends at its
year-end. Both Canterra and Forterrahave December 31 year-ends.
Forterra gas provided the following information
Required:
A. Calculate Forterra’s cumulative translation gain/loss for 2X21, using the presentation currency method.
B. Calculate Forterra’s cumulative translated gain/loss for 2X21, using the functional currency method.
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