Question

In: Accounting

Aerkion Company starts 2015 with two assets: cash of 19,000 LCU (local currency units) and land...

Aerkion Company starts 2015 with two assets: cash of 19,000 LCU (local currency units) and land that originally cost 70,000 LCU when acquired on April 4, 2005. On May 1, 2015, Aerkion rendered services to a customer for 33,000 LCU, an amount immediately paid in cash. On October 1, 2015, the company incurred a 19,800 LCU operating expense that was immediately paid. No other transactions occurred during the year. Currency exchange rates for 1 LCU follow:

  
  April 4, 2005 LCU 1 = $ 0.32
  January 1, 2015 1 = 0.33
  May 1, 2015 1 = 0.34
  October 1, 2015 1 = 0.35
  December 31, 2015 1 = 0.39
a.

Assume that Aerkion is a foreign subsidiary of a U.S. multinational company that uses the U.S. dollar as its reporting currency. Assume also that the LCU is the subsidiary’s functional currency. What is the translation adjustment for this subsidiary for the year 2015?

b.

Assume that Aerkion 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 2015?

Solutions

Expert Solution

Translation adjustment for this subsidiary for the year 2015:
Particulars LCU Rate Amt
Net assets 01/01/2015 $            89,000 0.33 $       29,370
(89000*0.33)
Changes in net assets rendered services $            33,000 0.34 $       11,220
(33000*0.34)
Incurred expenses $          -19,800 0.35 $        -6,930
(19800*0.35)
Net assets 31/12/2015 $        1,02,200 $       33,660
Net assets 31/12/2015 at current exchange rate $        1,02,200 0.39 $       39,858
(102200*0.39)
Translation adjustment $         6,198
(39858-33660)
Remeasurement gain or loss for 2015:
Particulars LCU rate Amt
Net monetary assets 01/01/2015 $            19,000 0.33 $         6,270
Changes in net monetary assets rendered services $            33,000 0.34 $       11,220
Incurred expenses $          -19,800 0.35 $        -6,930
Net monetary assets 31/12/2015 $            32,200 $       10,560
Net assets 31/12/2015 at current exchange rate $            32,200 0.39 $       12,558
Re-measurement gain $         1,998

Related Solutions

CONSOLIDATED BALANCE SHEET (millions of dollars) 2016 2015 Assets 2016 2015 Current assets 2016 2015 Cash...
CONSOLIDATED BALANCE SHEET (millions of dollars) 2016 2015 Assets 2016 2015 Current assets 2016 2015 Cash and cash equivalents 3,657 3,705 Notes and accounts receivable 21,394 19,875 Inventories: Crude oil, products and merchandise 10,877 12,037 Materials and supplies 4,203 4,208 Other current assets 1,285 2,798      Total current assets 41,416 42,623 Crude oil, products and merchandise inventories are carried at the lower of current market value or cost (generally determined under the last-in, first-out method – LIFO). Inventory costs include...
"A local delivery company has purchased a delivery truck for $19,000. The truck will be depreciated...
"A local delivery company has purchased a delivery truck for $19,000. The truck will be depreciated under MACRS as a five-year property. The trucks market value (salvage value) is expected to decrease by $2,100 per year. It is expected that the purchase of the truck will increase its revenue by $11,000 annually. The O&M costs are expected to be $3,800 per year. The firm is in the 40% tax bracket, and its MARR is 15.3%. If the company plans to...
International Co. started 2018 with two assets: Cash of §26,000 (Stickles) and Land that originally cost...
International Co. started 2018 with two assets: Cash of §26,000 (Stickles) and Land that originally cost §72,000 when acquired on April 4, 2015. On May 1, 2018, the company rendered services to a customer for §36,000, an amount immediately paid in cash. On October 1, 2018, the company incurred an operating expense of §22,000 that was immediately paid. No other transactions occurred during the year so an average exchange rate is not necessary. Currency exchange rates were as follows: April...
On January 1, 2018, Red Flash Photography had the following balances: Cash, $19,000; Supplies, $8,700; Land,...
On January 1, 2018, Red Flash Photography had the following balances: Cash, $19,000; Supplies, $8,700; Land, $67,000; Deferred Revenue, $5,700; Common Stock $57,000; and Retained Earnings, $32,000. During 2018, the company had the following transactions:   1. February 15 Issue additional shares of common stock, $27,000. 2. May 20 Provide services to customers for cash, $42,000, and on account, $37,000. 3. August 31 Pay salaries to employees for work in 2018, $30,000. 4. October 1 Purchase rental space for one year,...
ARID Company Income Statement FYE 12/31 Assets 2015 2014 Current assets Cash $       45,000 $       23,000...
ARID Company Income Statement FYE 12/31 Assets 2015 2014 Current assets Cash $       45,000 $       23,000 Short-term investments 36,000 18,000 Accounts receivable 94,000 89,000 Inventory 82,000 68,000 Total current assets 257,000 198,000 Plant assets (net) 550,000 560,000 Total assets $807,000 $758,000 Liabilities and Stockholders' Equity Current liabilities Accounts payable 140,000 120,000 Income taxes payable 35,000 38,000 Total current liabilities 175,000 158,000 Long-term liabilities Bonds payable 160,000 170,000 Total liabilities 335,000 328,000 Stockholders' equity Common stock ($5 par) 195,000 185,000 Retained...
Balance​ Sheet: ​3/31/2016 ​12/31/2015 ​9/30/2015 ​6/30/2015 Assets Current Assets Cash and cash equivalents 293 300 255...
Balance​ Sheet: ​3/31/2016 ​12/31/2015 ​9/30/2015 ​6/30/2015 Assets Current Assets Cash and cash equivalents 293 300 255 232 Net receivables 401 362 385 460 Inventory 374 342 437 306 Other current assets 60 43 53 45 Total Current Assets ​1,128 ​1,047 ​1,130 ​1,043 ​Long-term investments 128 97 long dash— 200 ​Property, plant, and equipment 979 991 995 ​1,052 Goodwill 744 748 736 742 Other assets 777 830830 903903 797 Total Assets ​3,756 3 comma 7133,713 3 comma 7643,764 ​3,834 Liabilities Current...
Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2015,...
Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2015, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe Company accounts:    Book Values Fair Values   Current assets $ 41,500   $ 41,500   Building 108,000   67,000   Land 17,000   35,200   Trademark 0   31,800   Goodwill 19,000   ?   Liabilities (50,500) (50,500)   Common stock (100,000)   Retained earnings (35,000)    Prepare Allerton’s entry to record its acquisition of Deluxe...
Coco acquired two non-current assets for cash on 1 August 2015 for use in her party...
Coco acquired two non-current assets for cash on 1 August 2015 for use in her party organizing business: • a 25-year lease on a shop for $200,000 • a chocolate fountain for $4,000. The fountain is to be depreciated at 25% pa using the reducing balance method. A full year of depreciation is charged in the year of acquisition and none in the year of disposal. Required Show the ledger account entries for these assets for the years ending 31...
A couple of years ago, the company Health4All purchased land, a building, and two depreciable assets...
A couple of years ago, the company Health4All purchased land, a building, and two depreciable assets from another corporation. All of these have recently been disposed. Use the information shown to determine the presence and amount of any capital gain, capital loss, or depreciation recapture. Asset Purchase Price, $ Recovery Period, Years Current Book Value, $ Sales Price, $ Land –230,000 - - 290,000 Building –800,000 27.5 305,000 255,000 Asset 1 –50,500 3 15,500 19,500 Asset 2 –10,000 3 5,000...
1. Companies having cash denominated in foreign currency units will not translate those units into U.S....
1. Companies having cash denominated in foreign currency units will not translate those units into U.S. dollars because cash has the same value in all currencies. True or False 2. Long-term debt: a. never has any portion classified as a current liability. b. when issued, is carried at an amount based on the proceeds received. c. consists of monetary obligations that fall due beyond two years from the balance sheet date. d. usually has an effective yield that is much...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT