The functional currency of DeZoort, Inc.’s British subsidiary isthe British pound. DeZoort borrowed pounds as a partial hedge of its investment in the subsidiary.In preparing consolidatedfinancial statements, DeZoort’s negative translation adjustment on its investment inthe subsidiiexceeded its foreign exchange gain on its borrowing. How should DeZoort reportthe effects of negative translation adjustment and foreign exchange gain inits consolidatedfinancial statements?
a. Report the translation adjustment in Other Comprehensive Income on the balance sheet and the foreign exchange gain in the income statement.
b. Report the translation adjustment in the income statement and defer the foreign exchangegain in Other Comprehensive Income on the balance sheet.
c. Report the translation adjustment less the foreign exchange gain in OtherComprehensiveIncome on the balance sheet.
d. Report the translation adjustment less the foreign exchange gain in the income statement.
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