Question

Problem II. Translation/Remeasurement Adjustment Anna Co. started 2018 with two assets: Cash of $20,000 (Stickles) and Land that originally cost $72,000 when acquired on April 4, 2015. On May 1, 2018, the company rendered services to a customer for $36,000, an amount immediately paid in cash. On October 1, 2018, the company incurred an operating expense of $22,000 that was immediately paid. No other transactions occurred during the year so an average exchange rate is not necessary. Currency exchange rates were as follows: April 4, 2015 January 1, 2018 May 1, 2018 October 1, 2018 December 31, 2018 $1 = $.28 $1 = $.29 $1=$.30 $1 = $.31 $1 = $.35 REQUIREMENT: You must show and label all supporting computations in A. Assume that Anna was a foreign subsidiary of a U.S. multinational company and the stickle ($) was the functional currency of the subsidiary. Calculate the translation adjustment for this subsidiary for 2018 and state whether this is a positive or a negative adjustment. B. Assume Anna was a foreign subsidiary of a U.S. multinational company and the U.S. dollar was the functional currency of the subsidiary. Prepare a schedule of changes in the net monetary assets of Anna for the year 2018 and properly label the resulting gain or loss.

Answer 1

A)

Cash 26,000 stickle

Land   72,000 stickle

Services rendered to customers 36000 stickles

Expenses   22,000 stickles   

Positive adjustment 14,000 stickles

B) The translation Adjustment for Anna co.

Cash ( 26,000 stickle) $7540

Land ( 72,000 stickle) $20160

Services rendered to customers (36000 stickles) = $10800

Expenses ( 22,000 stickles) ($6820)

Gain $3980