Question

A U.S. company acquired a Turkish subsidiary at the beginning of the current year. The subsidiary's...

A U.S. company acquired a Turkish subsidiary at the beginning of the current year. The subsidiary's trial balances for January 1 and December 31 are presented below, in Turkish lira.

January 1

Dr (Cr)

December 31

Dr (Cr)

Cash, receivables

₺   40,000

₺ 20,000

Plant & equipment, net

400,000

435,000

Liabilities

  (175,000)

  (170,000)

Capital stock

(115,000)

(115,000)

Retained earnings, January 1

(150,000)

(150,000)

Dividends

15,000

Sales revenue

(800,000)

Operating expenses

________

765,000

Total

₺ 0

₺ 0


New plant & equipment of ₺100,000 was acquired during the year. Operating expenses include ₺65,000 of depreciation on plant & equipment, of which ₺10,000 is related to plant & equipment purchased during the year. Exchange rates (U.S.$/₺) are as follows:

January 1

$0.24

Average for year

0.25

Plant & equipment acquired

0.26

Dividends declared

0.27

December 31

0.30


Assume that the subsidiary's functional currency is the Turkish lira. What is the translation gain or loss for the year?

A.

$14,600 loss

B.

$17,200 gain

C.

$13,150 loss

D.

$15,800 gain

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