Watson Company has a subsidiary in the country of Alonza where the local currency unit is the kamel (KM). On December 31, 2010, the subsidiary has the following balance sheet:
Cash | KM 16,000 | Notes payable (due 2012) | KM 19,000 |
Inventory | 10,000 | Common stock | 20,000 |
Land | 4,000 | Retained earnings | 10,000 |
Building | 40,000 |
|
|
Accumulated depreciation | (21,000) |
|
|
| KM 49,000 |
| KM 49,000 |
The subsidiary acquired the inventory on August 1, 2010, and the land and buildings in 2000. It issued the common stock in 1998. During 2011, the following transactions took place:
2011 |
|
Feb. 1 | Paid 5,000 KM on the note payable. |
May 1 | Sold entire inventory for 15,000 KM on account. |
June 1 | Sold land for 5,000 KM cash. |
Aug. 1 | Collected all accounts receivable. |
Sept. 1 | Signed long-term note to receive 6,000 KM cash. |
Oct. 1 | Bought inventory for 12,000 KM cash. |
Nov. 1 | Bought land for 4,000 KM on account. |
Dec. 1 | Paid 3,000 KM cash dividend to parent. |
Dec. 31 | Recorded depreciation for the entire year of 2,000 KM |
The exchange rates for 1 KM are as follows:
1998 | 1 KM = $0.24 |
2000 | 1 = 0.21 |
August 1, 2010 | 1 = 0.31 |
December 31, 2010 | 1 = 0.32 |
February 1, 2011 | 1 = 0.33 |
May 1, 2011 | 1 = 0.34 |
June 1, 2011 | 1 = 0.35 |
August 1, 2011 | 1 = 0.37 |
September 1, 2011 | 1 = 0.38 |
October 1, 2011 | 1 = 0.39 |
November 1, 2011 | 1 = 0.40 |
December 1, 2011 | 1 = 0.41 |
December 31, 2011 | 1 = 0.42 |
Average for 2011 | 1 = 0.37 |
a. If this is a translation, what is the translation adjustment determined solely for 2011?
b. If this is a remeasurement, what is the remeasurement gain or loss determined solely for 2011?
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