On January 1, 20X7, CP Co. (a Canadian company) purchased 80% of SF Co. (a U. S. company) at a cost of US$50,000.The book values of SF’s net assets were equal to their fair market values on this date except for the building, which had a fair market value of US$65,000 and a remaining useful life of 10 years. This building was purchased by SF on January 2, 20X3, the date SF Co. was incorporated and all its common shares issued. Goodwill was not impaired in 20X7.The statement of financial position of SF in U. S. dollars on January 1, 20X7, is as follows: SF Co. Statement of financial position As at January 1, 20X7Cash 5,000Accounts receivable 15,000Inventory (purchased Dec. 17, 20X6) 5,000Building (net) 55,000Total Assets 80,000Current liabilities 18,000Bonds payable 25,000Common shares 10,000Retained earnings 27,000Total Liabilities = 80,000On July 1, 20X7, SF purchased machinery at a cost of US$30,000. The machinery has a 10-year useful life with zero residual value. Straight-line depreciation is appropriate. The following exchange rates were in effect during 20X7:January 2, 20X3 US$1 = $1.32December 17, 20X6 US$1 = $1.37January 1, 20X7 US$1 = $1.40March 1, 20X7 US$1 = $1.41July 1, 20X7 US$1 = $1.42December 31, 20X7 US$1 = $1.3920X7 average US$1 = $1.38The financial statements of SF for December 31, 20X7, are reported below. SF Co. Statement of financial position As at December 31, 20X7SF (US$)Cash 6,000Accounts receivable 12,500Inventory (purchased March 1, 20X7) 7,000Machinery (net) 28,500Building (net) 49,500 103,500Current liabilities 20,000Bonds payable 25,000Common shares 10,000Retained earnings, Dec 31 48,500 103,500 SF Co. Statement of comprehensive income For the year ended December 31, 20X7Sales 76,500Cost of goods sold 20,000Depreciation 7,000Other expenses 26,000 23,500.Assume that expenses have been incurred evenly throughout the year. SF does not have any balances related to accumulated other comprehensive income, where applicable. When SF declares dividends for a particular year, it always does so on December 31.Required:a) Assuming that SF’s functional currency is the Canadian dollar:i. Calculate the foreign exchange gain or loss on net monetary items for 20X7. (5.5 marks)ii. Translate the statement of comprehensive income for the year ended December 31, 20X7. (2.5 marks)iii. Reconcile the change in translated retained earnings for the year ended December 31, 20X7. (1 mark)iv. Translate the statement of financial position for the year ended December 31, 20X7. (3.5 marks)b) Assuming that SF’s functional currency is the U. S. dollar:i. Calculate the foreign exchange gain or loss on net assets for 20X7. (4 marks)ii. Translate the statement of comprehensive income for the year ended December 31, 20X7. (2 marks)iii. Translate the statement of financial position for the year ended December 31, 20X7. (2 marks)