Question

Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2016, the subsidiary had the following balance sheet (amounts are in thousands (000's)):

Cash	NGN	15,560		Notes payable	NGN	20,080
Inventory		10,400		Common stock		20,080
Land		4,040		Retained earnings		10,040
Building		40,400
Accumulated depreciation		(20,200	)
	NGN	50,200			NGN	50,200

The subsidiary acquired the inventory on August 1, 2016, and the land and building in 2010. It issued the common stock in 2008. During 2017, the following transactions took place:

2017
Feb. 1	Paid 8,040,000 NGN on the note payable.
May 1	Sold entire inventory for 16,400,000 NGN on account.
June 1	Sold land for 6,040,000 NGN cash.
Aug. 1	Collected all accounts receivable.
Sept.1	Signed long-term note to receive 8,040,000 NGN cash.
Oct. 1	Bought inventory for 20,040,000 NGN cash.
Nov. 1	Bought land for 3,040,000 NGN on account.
Dec. 1	Declared and paid 3,040,000 NGN cash dividend to parent.
Dec. 31	Recorded depreciation for the entire year of 2,020,000 NGN.

The U.S dollar ($) exchange rates for 1 NGN are as follows:

2008	NGN 1	=	$	0.0052
2010	1	=		0.0046
August 1, 2016	1	=		0.0066
December 31, 2016	1	=		0.0068
February 1, 2017	1	=		0.0070
May 1, 2017	1	=		0.0072
June 1, 2017	1	=		0.0074
August 1, 2017	1	=		0.0078
September 1, 2017	1	=		0.0080
October 1, 2017	1	=		0.0082
November 1, 2017	1	=		0.0084
December 1, 2017	1	=		0.0086
December 31, 2017	1	=		0.0092
Average for 2017	1	=		0.0082

1. Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2017?

2. Assuming the U.S.$ is the subsidiary's functional currency, what is the remeasurement gain or loss determined solely for 2017?

Answer 1

Assets	NGN	Liabilities	NGN
Cash	15560	Notes Payable	20080
Inventory	10400	Common Stock	20080
Land	4040	Retained Earnings	10040
Building	40400
Accumulated Depreciation	-20200
	50200		50200
Net Assets
Total Assets as per Balance Sheet - External Liabilities = 50200 - 20080=30120

	Translation Adjustment for 2017
					NGN	FX Rate	Restated Amount USD
	Net Assets as on 1/1/2017				30,120,000	0.0068	204,816
	Change in Net Assets during 2017
1-May	Sold Inventory		16,400,000	10,400,000	6,000,000	0.0072	43,200
1-Jun	Sold Land		6,040,000	4,040,000	2,000,000	0.0074	14,800
1-Dec	Paid Dividends		3,040,000		(3,040,000)	0.0086	(26,144)
31-Dec	Recorded Depreciation for the Yr		2,020,000		(2,020,000)	0.0092	(18,584)
	Net Assets as 31/12/2017				33,060,000		218,088
	Net Assets as 31/12/2017 at current FX Rate				33,060,000	0.0092	304,152
	Translation Adjustment for 2017(304,152 - 218,088)						86,064

	Remeasurement Gain / Loss
				NGN		FX Rate	Restated Amount USD
	Net Liabiliteis as on 1/1/2017			50,200,000		0.0068	341,360
	Change in Net Assets during 2017
1-May	Sold Inventory			(16,400,000)		0.0072	(118,080)
1-Jun	Sold Land			(6,040,000)		0.0074	(44,696)
1-Oct	Bought Inventory			20,040,000		0.0082	164,328
1-Nov	Bought Land			3,040,000		0.0084	25,536
1-Dec	Paid Dividends			3,040,000		0.0086	26,144
	Ending Net Liability			53,880,000			394,592
	Ending Net Liability at Current Fx Rate			53,880,000		0.0092	495,696
	Re-measurement Gain(495,696 - 394,592)						101,104