Question

Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2017 with three assets: cash of 28,200 dinars, accounts receivable of 82,000 dinars, and land that cost 220,000 dinars when acquired on April 1, 2016. On January 1, 2017, Zugar has a 170,000 dinar note payable, and no other liabilities. On May 1, 2017, Zugar renders services to a customer for 140,000 dinars, which was immediately paid in cash. On June 1, 2017, Zugar incurred a 120,000 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	$0.53	=	1 dinar
January 1, 2017	0.56	=	1
May 1, 2017	0.57	=	1
June 1, 2017	0.59	=	1
December 31, 2017	0.61	=	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?

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?

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.)

Answer 1

a.

Calculation of Net Asset	Amount in dinars
Cash	28,200
Accounts Receivable	82,000
Land	220,000
Total asset	330,200
Less :
Notes Payable	170,000
Net asset	160,200

		dinars	exchange rate	Amount in
as on January 1 2017	Net Asset	160,200.00	0.56	89,712.00
	Add : Cash received	140,000.00	0.57	79,800.00
	Less : Cash paid	120,000.00	0.59	70,800.00
	Net Asset A	180,200.00		98,712.00
as on December 1 2017	Net asset B	180,200.00	0.61	109,922.00
Positive translation adjustment to be made(109,922-98,712)				11,210.00

b.

Gain re-measurement is as follows:

Only Monetary accounts have to be re-measured 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 re-measurement.

Calculation of Net Asset	Amount in dinars
Cash	28,200
Accounts Receivable	82,000
Less: Notes Payable	170,000
Net asset	-59,800

		dinars	exchange rate	Amount in
as on January 1 2017	Net Asset	-59,800.00	0.56	-33,488.00
	Add : Cash received	140,000.00	0.57	79,800.00
	Less : Cash paid	120,000.00	0.59	70,800.00
	Net Asset A	-39,800.00		-24,488.00
as on December 1 2017	Net asset B	-39,800.00	0.61	-24,278.00
Positive translation adjustment to be made(24,488-24,278)				210

c.

Translated value of Land Account = land × Exchange rate is of December 31, 2017

=220,000 × 0.61

= 134,200

Re-measured Value of Land Account = land × Exchange rate is of acquisition date

= 220,000 × 0.53

= 116,600