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Art Inc. $($Art$),$ a Canadian company, has one wholly owned American subsidiary called Paint It Ltd$.($Paint$)$ based in Los Angeles, California, which was acquired January $1,2023.$

Paint submitted its financial statements for $2023$ to Art. Selected exchange rates in effect throughout $2023$ are shown below:

January $1,2023$: US$$1=$ CDN$$1\mathrm{.}35$

December $31,2023$: US$$1=$ CDN$$1\mathrm{.}375$

Average for $2023$: US$$1=$ CDN$$1\mathrm{.}36$

Date of purchase of inventory on hand: US$$1=$ CDN$$1\mathrm{.}345$

Date dividends were declared and paid: US$$1=$ CDN$$1\mathrm{.}37$

Paint's financial results for $2023$ were as follows:

Paint Financial Statements

at December $31,2023$

$($in U$.$S$.$ dollars$)$

Income Statement: $($in U$.$S$.$ dollars$)$

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 $1,2023$ $$400,000$

Net Income $500,000$

Dividends $(100,000)$

December $31,2023$ $$800,000$

Balance Sheet

Cash $$1,200,000$

Accounts receivable $1,900,000$

Inventory $700,000$

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$

Other information:

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

$$ Paint's functional currency is the U$.$S$.$ dollar.

Which of the following rates would be used to translate Paint's income statement items?

Multiple Choice

US$$1=$ CDN$$1\mathrm{.}35$

US$$1=$ CDN$$1\mathrm{.}37$

US$$1=$ CDN$$1\mathrm{.}36$

US$$1=$ CDN$$1\mathrm{.}345$

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