Question

The following account balances are for the Agee Company as of January 1, 2017, and December 31, 2017. All amounts are denominated in kroner (Kr).

	January 1, 2017			December 31, 2017
Accounts payable		(14,000	)		(22,000	)
Accounts receivable		40,000			90,000
Accumulated depreciation—buildings		(31,000	)		(36,000	)
Accumulated depreciation—equipment		0			(6,100	)
Bonds payable—due 2020		(50,000	)		(50,000	)
Buildings		120,000			98,000
Cash		46,000			9,100
Common stock		(70,000	)		(83,000	)
Depreciation expense		0			26,000
Dividends (10/1/17)		0			43,000
Equipment		0			41,000
Gain on sale of building		0			(7,100	)
Rent expense		0			15,100
Retained earnings		(41,000	)		(41,000	)
Salary expense		0			31,000
Sales		0			(113,000	)
Utilities expense		0			5,000

Additional Information

• Agee issued additional shares of common stock during the year on April 1, 2017. Common stock at January 1, 2017, was sold at the start of operations in 2010.

• Agee purchased buildings in 2011 and sold one building with a book value of Kr 17,000 on July 1 of the current year.

• Equipment was acquired on April 1, 2017.

Relevant exchange rates for 1 Kr were as follows:

2010	$	2.95
2011		2.75
January 1, 2017		3.05
April 1, 2017		3.15
July 1, 2017		3.35
October 1, 2017		3.45
December 31, 2017		3.55
Average for 2017		3.25

1. Assuming the U.S. dollar is the functional currency, what is the remeasurement gain or loss for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $145,200, which included a remeasurement loss of $28,300.

2. Assuming the foreign currency is the functional currency, what is the translation adjustment for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $162,250, and a cumulative translation adjustment of $9,650 (credit balance).

(Input all answers as positive.)

(Input all answers as positive.) a. Remeasurement b. Translation adjustment

Answer 1

1. Remeasurement

Remeasurement calculations will be made only on current assets and liabilities. therefore, calculations will be like this

	Jan-17		17-Dec		2017 Movement
	A	B	C	D	E	F	G = F-B	D-G
	Kr	$ @3.05	Kr	$ @3.55	Kr (Dec-17 minus Jan-17	$ @3.25	Dec-17 values without Remeasurement	Remeasurement Gain/(Loss)
Accounts payable	(14,000)	(42,700)	(22,000)	(78,100)	(8,000)	(26,000)	(68,700)	(9,400)
Accounts Receivable	40,000	122,000	90,000	319,500	50,000	162,500	284,500	35,000
Cash	46,000	140,300	9,100	32,305	(36,900)	(119,925)	20,375	11,930
								37,530

2. Translation Balance

	Dec-17 Kr	Translation Rate	Dec-17 $
Accounts Payable	(22,000)	Remeasured Value	(68,700)
Accoutns Receivable	90,000	Remeasured Value	284,500
Acc Dep -Buildings	(36,000)	3.55	(127,800)
Acc Dep - equipments	(6,100)	3.55	(21,655)
Bonds Payable	(50,000)	3.55	(177,500)
Building	98,000	3.55	347,900
Cash	9,100	Remeasured Value	20,375
Common stock	(83,000)	[email protected] and [email protected]	(247,450)
Depreciation Expense	26,000	3.25	84,500
Dividends	43,000	3.25	139,750
Equipment	41,000	3.55	145,550
Gain on sale of building	(7,100)	3.35	(23,785)
Rent expense	15,100	3.25	49,075
Retained earnings	(41,000)	Balance will remain as last year	(145,200)
Salary expense	31,000	3.25	100,750
Sales	(113,000)	3.25	(367,250)
Utilities expense	5,000	3.25	16,250
Remeasurement			(37,530)
Translation (Balancing Figure)				28,220	(Debit Value)