Proof of Translation Adjustment
MaMi Co. Ltd. located in Mexico City is a wholly owned subsidiary of Special Foods, a U.S. company. At the beginning of the year, MaMi’s condensed balance sheet was reported in Mexican pesos (MXP) as follows:
Assets 3,425,000 | Liabilities | 2,850,000 |
| Stockholders’ Equity | 575,000 |
During the year, the company earned income of MXP270,000 and on November 1 declared dividends of MXP150,000. The Mexican peso is the functional currency. Relevant exchange rates between the peso and the U.S. dollar follow:
January 1 (beginning of year) | $0.0870 |
Average for year | 0.0900 |
November 1 | 0.0915 |
December 31 (end of year) | 0.0930 |
Required
a. Prepare a proof of the translation adjustment, assuming that the beginning credit balance of the accumulated other comprehensive income—translation adjustment was $3,250.
b. Did the U.S. dollar strengthen or weaken against the Mexican peso during the year?
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