Question

Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2017 with three assets: cash of 20,400 dinars, accounts receivable of 80,400 dinars, and land that cost 204,000 dinars when acquired on April 1, 2016. On January 1, 2017, Zugar has a 154,000 dinar note payable, and no other liabilities. On May 1, 2017, Zugar renders services to a customer for 124,000 dinars, which was immediately paid in cash. On June 1, 2017, Zugar incurred a 104,000 dinar operating expense, which was immediately paid in cash. No other transactions occurred during the year. Currency exchange rates for 1 dinar follow:

April 1, 2016	$0.37	=	1 dinar
January 1, 2017	0.40	=	1
May 1, 2017	0.41	=	1
June 1, 2017	0.43	=	1
December 31, 2017	0.45	=	1

1. Assume that Zugar is a foreign subsidiary of a U.S. multinational company that uses the U.S. dollar as its reporting currency. Assume also that the dinar is the subsidiary’s functional currency. What is the translation adjustment for this subsidiary for the year 2017?

2. Assume that Zugar is a foreign subsidiary of a U.S. multinational company that uses the U.S. dollar as its reporting currency. Assume also that the U.S. dollar is the subsidiary’s functional currency. What is the remeasurement gain or loss for 2017?

3. Assume that Zugar is a foreign subsidiary of a U.S. multinational company. On the December 31, 2017, balance sheet, what is the translated value of the Land account? On the December 31, 2017, balance sheet, what is the remeasured value of the Land account?

(Input all amounts as positive.)

a		translation adjustment
b		remeasurement
c	translated value of land
	remeasured value of land

Answer 1

Answer:

a)	Translation adjsutment
		Calculation of Net Asset			dinnar	exchange rate	Amount in
			Cash		20400
			Accounts Receivable		80400
			Land		204000
			Total asset		304800
			Less :
				Notes Payable	154000
			Net asset		150800
	as on January 1 2017		Net Asset		150800	0.40	60,320
			Add : Cash received		124000	0.41	50840
			Less : Cash paid		104000	0.43	44720
			Net Asset	A	170800		66440
	as on December 31 2017		Net asset	B	170800	0.45	76860
		Positive translation adjustment to be made			B-A		10420
b)	Gain Remeasurement is as follows
	Only Monetary accounts has to be remeasured using the exchange rate at the end of the year
	So all adjustment in above will remain the same except land which has to be excluded for finding
	gain remeasurement.
		Calculation of Net Asset			dinnar	exchange rate	Amount in
			Cash		20400
			Accounts Receivable		80400
			Less :
				Notes Payable	154000
			Net asset		-53200
	as on January 1 2017		Net Asset		-53200	0.40	-21280
			Add : Cash received		124000	0.41	50840
			Less : Cash paid		104000	0.43	44720
			Net Asset	A	-33200		-15160
	as on December 31 2017		Net asset	B	-33200	0.45	-14940
		Remeasurement gain			B-A		220
C)	Translated value of Land Account is				=204000*0.45
					91800		Exchange rate is of December 31, 2017
	Remeasured Value of Land Account is				=204000*0.37		Exchange rate is of acquisition date
					75480