Question

Ju yuui leasing and any assurpLUIIS Mdul. Translated/Remeasured Trial Balances On January 1, 2019, the U.K. subsidiary of national Corporation had the following condensed the following condensed balance sheet, in pounds sterling (in millions): Assets Cash and receivables.. Inventory (FIFO) ......... Plant assets .............. Accumulated depreciation. Total assets £2,000 2,200 1,600 (400) £5,400 Liabilities and equity Accounts payable..... Long-term debt. Equity ......... £2,100 1,200 2,100 Total liabilities and equity...... £5,400 The exchange rate on January 1, 2019 was $1.20/£. Inventory at January I was purchased when the ex- change rate was $1.18/£. Plant assets at January 1 were acquired when the exchange rate was $1.80/£. Plant assets costing 1 200 million were purchased when the exchange rate was $1.22/£. Depreciation of £50 was taken on these plant assets in 2019. At the end of 2019, the subsidiary reported the following trial balance: (in millions) Dr (Cr) Cash and receivables... Inventory (FIFO) ........ Plant assets ............... Accumulated depreciation Accounts payable... Long-term debt ....... Equity, January 1 ....... Sales. . . . . . . . . . . . . . ... Cost of goods sold. ....... Depreciation expense. Other operating expenses £2,660 2,500 1,800 (560) (2,200) (1,100) (2,100) (4,000) 2,000 160 840 else..... £ 0 Total ........ The ending inventory was purchased when the exchange rate was $1.28/£. Sales and other operating expenses occurred evenly over the year. At year-end, the exchange rate was $1.30/£; the average for the year was $1.25/£. Required a. Prepare the remeasured December 31, 2019 trial balance of the U.K. subsidiary, assuming the U.S. dollar is the functional currency of the subsidiary. Assume the remeasured balance of equity on Janu- ary 1, 2019 was $3,196 million. Prepare a schedule to calculate the remeasurement gain or loss for 2019. b. Repeat part a, assuming the pound is the functional currency of the subsidiary. Assume the translated balance of equity on January 1, 2019, is $2,520 million. Prepare a schedule to calculate the transla- tion gain or loss for 2019. Un Von

Answer 1

1) Functional Currency USD

Rules of translation

revenue expenses	average or actual rate
monetory items	closing rate
non monetory items	rate at the date of transaction

	Pound		USD
Particulars	Dr (Cr)	Rate	Dr (Cr)	Item
Cash and receivables	2,660	1.30	3,458	Monetory
Inventory (FIFO)	2,500	1.28	3,200	non Monetory
Plant Assets Opening	1,600	1.80	2,880	non Monetory
Plant Assets New purchased	200	1.22	244	non Monetory
Accumulated Depreciation - Opening	(510)	1.80	(918)	non Monetory
Accumulated Depreciation - New	(50)	1.22	(61)	non Monetory
Account Payables	(2,200)	1.30	(2,860)	Monetory
Long term debt	(1,100)	1.30	(1,430)	Monetory
Equity Jan 1	(2,100)	1.20	(2,520)	non Monetory
Sales	(4,000)	1.25	(5,000)	Revenue
Cost of goods sold	2,000	1.25	2,500	Revenue
Depreciation	160	1.25	200	Revenue
Operating expenses	840	1.25	1,050	Revenue
Re-measurement difference income			(743)	Revenue
	-		-

2) Functional Currency Pound

Assets and liabilities	closing rate at the date of that balance sheet
Income and expenses	Actual or Average Rate

	Pound		USD
Particulars	Dr (Cr)	Rate	Dr (Cr)	Item
Cash and receivables	2,660	1.30	3,458	Asset
Inventory (FIFO)	2,500	1.30	3,250	Asset
Plant Assets Opening	1,600	1.30	2,080	Asset
Plant Assets New purchased	200	1.30	260	Asset
Accumulated Depreciation - Opening	(510)	1.30	(663)	Asset
Accumulated Depreciation - New	(50)	1.30	(65)	Asset
Account Payables	(2,200)	1.30	(2,860)	Liability
Long term debt	(1,100)	1.30	(1,430)	Liability
Equity Jan 1	(2,100)	1.30	(2,730)	Equity
Sales	(4,000)	1.25	(5,000)	Revenue
Cost of goods sold	2,000	1.25	2,500	Revenue
Depreciation	160	1.25	200	Revenue
Operating expenses	840	1.25	1,050	Revenue
Remeasurement difference in Equity			(50)	Equity
	-		-

The Sum is solved as per IAS 21 The effects of changes in foreign exchange rates