Question

Please help me solve the translation adjustment.

Watson Company has a subsidiary in the country of Alonza where the local currency unit is the kamel (KM) On December 31, 2014, the subsidiary has the following balance sheet Cash Inventory Land Building Accumulated depreciation KM 19,000 30,000 15,000 KM 10,000 Notes payable (due 2016) 12,500 Common stock 9,000 Retained earnings 65,000 (32,500) KM 64,000 KM 64,000 The subsidiary acquired the inventory on August 1, 2014, and the land and buildings in 2000. It issued the common stock in 1998. During 2015, the following transactions took place 2015 Feb. 1 Paid 7,500 KM on the note payable May 1 Sold entire inventory for 17,000 KM on account June 1 Sold land for 10,500 KM cash. Aug. 1Collected all accounts receivable Sept.1 Signed long-term note to receive 8,500 KM cash Oct. 1 Bought inventory for 13,000 KM cash Nov. 1 Bought land for 9,000 KM on account. Dec. 1 Declared and paid 2,800 KM cash dividend to parent. Dec. 31 Recorded depreciation for the entire year of 3,250 KM The exchange rates for 1 KM are as follows: 1998 2000 August 1, 2014 December 31, 2014 February 1, 2015 May 1, 2015 June 1, 2015 August 1, 2015 September 1, 2015 October 1, 2015 November 1, 2015 December 1, 2015 December 31, 2015 Average for 2015 1 KM$0.30 10.27 10.37 10.38 10.39 10.40 10.41 10.43 10.44 10.45 10.46 10.47 10.50 10.44

Answer 1

Calculate the translation adjustment :-

Particulars	Amount(KM)	Exchange Rate	Amount($)
Net Asset Balance(10000+12500+9000)	31500	0.38	11970
Increases in Net Assets (Income) :-
Sold Inventory at Profit (17000-12500)	4500	0.40	1800
Sold Land at Gain (10500-9000)	1500	0.41	615
Decrease in Net Assets :-
Dividend Paid	(2800)	0.47	(1316)
Depreciation Expense	(3250)	0.44	(1430)
Net Assets Balance	31450		11639
Net Assets Balance at Current Exchange Rate	31450	0.50	(15725)
Translation Adjustment		Positive	(4086)

Translation Adjustment Positive is $4086