Question

Watson Company has a subsidiary in the country of Alonza where the local currency unit is the kamel (KM). On December 31, 2014, the subsidiary has the following balance sheet:

Cash	KM	3,500	Notes payable (due 2016)	KM	22,000
Inventory		15,500	Common stock		25,000
Land		8,000	Retained earnings		12,500
Building		65,000
Accumulated depreciation		(32,500)
	KM	59,500		KM	59,500

The subsidiary acquired the inventory on August 1, 2014, and the land and buildings in 2000. It issued the common stock in 1998. During 2015, the following transactions took place:

2015
Feb. 1	Paid 10,500 KM on the note payable.
May 1	Sold entire inventory for 24,000 KM on account.
June 1	Sold land for 8,900 KM cash.
Aug. 1	Collected all accounts receivable.
Sept.1	Signed long-term note to receive 11,500 KM cash.
Oct. 1	Bought inventory for 13,500 KM cash.
Nov. 1	Bought land for 8,000 KM on account.
Dec. 1	Declared and paid 4,000 KM cash dividend to parent.
Dec. 31	Recorded depreciation for the entire year of 3,250 KM.

The exchange rates for 1 KM are as follows:

1998	1 KM	=	$	0.30
2000	1	=		0.27
August 1, 2014	1	=		0.37
December 31, 2014	1	=		0.38
February 1, 2015	1	=		0.39
May 1, 2015	1	=		0.40
June 1, 2015	1	=		0.41
August 1, 2015	1	=		0.43
September 1, 2015	1	=		0.44
October 1, 2015	1	=		0.45
November 1, 2015	1	=		0.46
December 1, 2015	1	=		0.47
December 31, 2015	1	=		0.42
Average for 2015	1	=		0.40

a.	If this is a translation, what is the translation adjustment determined solely for 2015?

      

b.	If this is a remeasurement, what is the remeasurement gain or loss determined solely for 2015?

Answer 1

Date of Transaction	Transaction	Rate to be used	Actual Done	Adjusted amount	Profit or Loss
FEB 1	Note Payable	Rate on date of Payment(.39$/KM)	10500*.39=4095$	4095$	0
MAY 1	Inventory Sold	Rate on date of Payment(.40$/KM)	24000*.40=$9600	9600$	0
June 1	Land Sold	Rate on date of sale(since cash Paymet)(.41$/KM)	8900*.41=$3649	$3649	0
AUG 1	Account Receivable collect	Average Rate	24000*.43=10320	24000*.4=9600	720
SEPT 1	Long term Note	At Closing rate	11500*.44=5060	11500*.42=4830	230
OCT 1	Bought Inventory	At rate on same day since bought in cash i,e .45$/km	13500*.45=6075	6075	0
NOV 1	Bought land	At Closing rate	8000*.46=3680	8000*.42=3360	320
DEC 1	Dividend Paid	At rate on same day since paid in cash i,e .47$/km	4000*.47=1880	1880	0
DEC 31	Depriciation	At Closing rate	3250*.42=1365	1365	0
				Profit or loss to be recognised at P&L	720$