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		(13,000	)		(19,500	)
Accounts receivable		41,000			91,000
Accumulated depreciation—buildings		(32,000	)		(37,000	)
Accumulated depreciation—equipment		0			(6,200	)
Bonds payable—due 2020		(51,000	)		(51,000	)
Buildings		121,000			98,500
Cash		47,000			9,200
Common stock		(71,000	)		(85,000	)
Depreciation expense		0			27,000
Dividends (10/1/17)		0			44,000
Equipment		0			42,000
Gain on sale of building		0			(7,200	)
Rent expense		0			15,700
Retained earnings		(42,000	)		(42,000	)
Salary expense		0			32,000
Sales		0			(117,000	)
Utilities expense		0			5,500

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 17,500 on July 1 of the current year.

• Equipment was acquired on April 1, 2017.

Relevant exchange rates for 1 Kr were as follows:

2010	$	3.00
2011		2.80
January 1, 2017		3.10
April 1, 2017		3.20
July 1, 2017		3.40
October 1, 2017		3.50
December 31, 2017		3.60
Average for 2017		3.30

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).

Answer 1

a.	Remeasurement	gain	$20480
b.	Translation adjustment	positive	$59180

Explanation:

Part A

	KR	x	Exchange rate	US$
Net monetary assets, 1/1/17 (47000+41000)-(13000+51000)	24000	x	3.10	74400
Increases in net monetary assets:				0
Issued common stock (4/1/17) (85000-71000)	14000	x	3.20	44800
Sold building (7/1/17) (17500+7200)	24700	x	3.40	83980
Sales (2017)	117000	x	3.30	386100
Decreases in net monetary assets:				0
Purchased equipment (4/1/17)	(42000)	x	3.20	(134400)
Paid dividends (10/1/17)	(44000)	x	3.50	(154000)
Rent expense (2017)	(15700)	x	3.30	(51810)
Salary expense (2017	(32000)	x	3.30	(105600)
Utilities expense (2017)	(5500)	x	3.30	(18150)
Net monetary assets, 12/31/17	40500			125320
Net monetary assets, 12/31/17 at current exchange rate	40500	x	3.60	145800
Remeasurement gain (credit)				(20480)

Net monetary assets: (Cash + Accounts Receivable) - (Account Payable + Bonds Payable

Cash proceeds from the sale of the building is determined by adding the Book value of the building sold and the Gain on sale of building.

Part B

	KR	x	Exchange rate	US$
Net assets, 1/1/17 (71000+42000)	91000	x	3.10	282100
Increases in net assets:
Issued common stock (4/1/17)	14000	x	3.20	44800
Gain on Sale of Building (7/1/17)	7200	x	3.40	24480
Sales (2017)	117000	x	3.30	386100
Decreases in net assets:
Paid dividends (10/1/17)	(44000)	x	3.50	(154000)
Depreciation expense (2017)	(27000)		3.30	(89100)
Rent expense (2017)	(15700)	x	3.30	(51810)
Salary expense (2017	(32000)	x	3.30	(105600)
Utilities expense (2017)	(5500)	x	3.30	(18150)
Net assets, 12/31/17	105000			318820
Net assets, 12/31/17 at current exchange rate	105000	x	3.60	378000
Translation adjustment (credit)				(59180)

Net assets: Common stock + Retained earnings

Selling a building at a gain, increases net assets by that amount.