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On December 31, Year 1, Kelly Corporation of Toronto paid 14.90 million Libyan dinars (LYD) for 100% of the outstanding common shares of Arkenu Company of Libya. On this date, the fair values of Arkenu's identifiable assets and liabilities were equal to their carrying amounts. Arkenu's comparative balance sheets and Year 2 income statement are as follows: Additional Information - Exchange rates - Arkenu Company declared and paid dividends on September 30, Year 2. - The inventories on hand on December 31 , Year 2, were purchased when the exchange rate was LYD1 =$0.63. Required: (a) Assume that Arkenu's functional currency is the Canadian dollar: (i) Calculate the Year 2 exchange gain or loss that would result from the translation of Arkenu's financial statements. (Enter answers in whole dollars and not in millions of dollars. Input all amounts as positive value. Omit currency symbol in your response.) $ (ii) Prepare translated financial statements for Year 2. (Round the values in the "Rate" column to 2 decimal places. Exchange gain, if any, should be entered as positive value, and Exchange loss, if any, should be entered with a minus sign. Enter answers in whole dollars and not in millions of dollars. Input all other amounts as positive values. Omit currency symbol in your response.) (b) Assume that Arkenu's functional currency is the Libyan dinar: (i) Calculate the Year 2 exchange gain or loss that would result from the translation of Arkenu's financial statements. (Enter answers in whole dollars and not in millions of dollars. Input all amounts as positive value. Omit currency symbol in your response.) $ (ii) Prepare translated financial statements for Year 2 . (Round the values in the "Rate" column to 2 decimal places. Loss amounts should be indicated with a minus sign. Enter answers in whole dollars and not in millions of dollars. Input all other amounts as positive values. Omit currency symbol in your response.) (c) Which functional currency would Arkenu prefer to use if it wants to show the following? (i) The strongest solvency position for the company Functional currency is Canadian dollar. Functional currency is Libyan dinar and accumulated foreign exchange adjustments (AFEA) are included in equity. Functional currency is Libyan dinar and AFEA are excluded from equity. (ii) The best return on shareholders' equity Functional currency is Canadian dollar. On December 31, Year 1, Kelly Corporation of Toronto paid 14.90 million Libyan dinars (LYD) for 100% of the outstanding common shares of Arkenu Company of Libya. On this date, the fair values of Arkenu's identifiable assets and liabilities were equal to their carrying amounts. Arkenu's comparative balance sheets and Year 2 income statement are as follows: Additional Information - Exchange rates - Arkenu Company declared and paid dividends on September 30, Year 2. - The inventories on hand on December 31 , Year 2, were purchased when the exchange rate was LYD1 =$0.63. Required: (a) Assume that Arkenu's functional currency is the Canadian dollar: (i) Calculate the Year 2 exchange gain or loss that would result from the translation of Arkenu's financial statements. (Enter answers in whole dollars and not in millions of dollars. Input all amounts as positive value. Omit currency symbol in your response.) $ (ii) Prepare translated financial statements for Year 2. (Round the values in the "Rate" column to 2 decimal places. Exchange gain, if any, should be entered as positive value, and Exchange loss, if any, should be entered with a minus sign. Enter answers in whole dollars and not in millions of dollars. Input all other amounts as positive values. Omit currency symbol in your response.) (b) Assume that Arkenu's functional currency is the Libyan dinar: (i) Calculate the Year 2 exchange gain or loss that would result from the translation of Arkenu's financial statements. (Enter answers in whole dollars and not in millions of dollars. Input all amounts as positive value. Omit currency symbol in your response.) $ (ii) Prepare translated financial statements for Year 2 . (Round the values in the "Rate" column to 2 decimal places. Loss amounts should be indicated with a minus sign. Enter answers in whole dollars and not in millions of dollars. Input all other amounts as positive values. Omit currency symbol in your response.) (c) Which functional currency would Arkenu prefer to use if it wants to show the following? (i) The strongest solvency position for the company Functional currency is Canadian dollar. Functional currency is Libyan dinar and accumulated foreign exchange adjustments (AFEA) are included in equity. Functional currency is Libyan dinar and AFEA are excluded from equity. (ii) The best return on shareholders' equity Functional currency is Canadian dollar

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