Watson Company has a subsidiary in the country of Alonza where the local currency unit is the kamel (KM). On December 31, 2010, the subsidiary has the following balance sheet:
Cash
KM 16,000
Notes payable (due 2012)
KM 19,000
Inventory
10,000
Common stock
20,000
Land
4,000
Retained earnings
Building
40,000
Accumulated depreciation
21,000
KM 49,000
The subsidiary acquired the inventory on August 1, 2010, and the land and buildings in 2000. It issued the common stock in 1998. During 2011, the following transactions took place:
2011
Feb. 1
Paid 5,000 KM on the note payable.
1-May
Sold entire inventory for 15,000 KM on account.
1-Jun
Sold land for 5,000 KM cash.
Aug. 1
Collected all accounts receivable.
Sept. 1
Signed long-term note to receive 6,000 KM cash.
Oct. 1
Bought inventory for 12,000 KM cash.
Nov. 1
Bought land for 4,000 KM on account.
Dec. 1
Paid 3,000 KM cash dividend to parent.
Dec. 31
Recorded depreciation for the entire year of 2,000 KM.
The exchange rates for 1 KM are as follows:
1998
1=KM $024
2000
1=021
1-Aug-10
1=031
31-Dec-10
1=032
1-Feb-11
1=033
1-May-11
1=034
1-Jun-11
1=035
1-Aug-11
1=037
1-Sep-11
1=038
1-Oct-11
1=039
1-Nov-11
1=040
1-Dec-11
1=041
31-Dec-11
1=042
Average for 2011
a. If this is a translation, what is the translation adjustment determined solely for 2011?
b. If this is a remeasurement, what is the remeasurement gain or loss determined solely for 2011?
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