Question

Solo Co. Ltd. located in Mexico City is a wholly owned subsidiary of Partner Inc., a U.S. company. At the beginning of the year, Solo’s condensed balance sheet was reported in Mexican pesos (MXP) as follows:

Assets	3,445,000	Liabilities	2,860,000
		Stockholders’ Equity	585,000

During the year, the company earned income of MXP250,000 and on November 1 declared dividends of MXP135,000. The Mexican peso is the functional currency. Relevant exchange rates between the peso and the U.S. dollar follow:

January 1 (beginning of year)	$	0.0870
Average for year		0.0900
November 1		0.0915
December 31 (end of year)		0.0930

Required:
a. Prepare a proof of the translation adjustment, assuming that the beginning credit balance of the accumulated other comprehensive income—translation adjustment account was $3,230.

Answer 1

Please find below table useful to compute desired results: -

End results would be as follows: -