Question

The following account balances are for the Agee Company as of January 1, 2017, and December 31, 2017. All amounts are denominated in kroner (Kr).

	January 1, 2017			December 31, 2017
Accounts payable		(13,000	)		(19,500	)
Accounts receivable		41,000			91,000
Accumulated depreciation—buildings		(32,000	)		(37,000	)
Accumulated depreciation—equipment		0			(6,200	)
Bonds payable—due 2020		(51,000	)		(51,000	)
Buildings		121,000			98,500
Cash		47,000			9,200
Common stock		(71,000	)		(85,000	)
Depreciation expense		0			27,000
Dividends (10/1/17)		0			44,000
Equipment		0			42,000
Gain on sale of building		0			(7,200	)
Rent expense		0			15,700
Retained earnings		(42,000	)		(42,000	)
Salary expense		0			32,000
Sales		0			(117,000	)
Utilities expense		0			5,500

Additional Information

Agee issued additional shares of common stock during the year on April 1, 2017. Common stock at January 1, 2017, was sold at the start of operations in 2010.

Agee purchased buildings in 2011 and sold one building with a book value of Kr 17,500 on July 1 of the current year.

Equipment was acquired on April 1, 2017.

Relevant exchange rates for 1 Kr were as follows:

2010	$	3.00
2011		2.80
January 1, 2017		3.10
April 1, 2017		3.20
July 1, 2017		3.40
October 1, 2017		3.50
December 31, 2017		3.60
Average for 2017		3.30

A. Assuming the U.S. dollar is the functional currency, what is the remeasurement gain or loss for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $145,200, which included a remeasurement loss of $28,300.

B. Assuming the foreign currency is the functional currency, what is the translation adjustment for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $162,250, and a cumulative translation adjustment of $9,650 (credit balance).

Answer 1

Balance Sheet Remeasurement'
Assets	Monetary/Non Monetary	Exchange rate	Amount in KR	Amount in USD
Accounts receivable	Monetary	3.6	91,000	327,600
Cash	Monetary	3.6	9,200	33,120
Buildings	Non Monetary	2.8	98,500	275,800
Equipment	Non Monetary	3.2	42,000	134,400
Total Assets			240,700	770,920
Accounts payable	Monetary	3.6	19,500	70,200
Accumulated depreciation—buildings	Non Monetary	2.8	37,000	103,600
Accumulated depreciation—equipment	Non Monetary	3.2	6,200	19,840
Bonds payable—due 2020	Monetary	3.6	51,000	183,600
Common stock	Non Monetary	3	71,000	213,000
		3.2	14,000	44,800
Retained earnings	Non Monetary		42,000	135,880
			240,700	770,920
Sales		3.3	117,000	386,100
Depreciation expense
Equipment		3.2	(6,200)	(19,840)
Builiding		2.8	(20,800)	(58,240)
Gain on sale of building (refer working below)			7,200	39,920
Rent expense		3.3	(15,700)	(51,810)
Salary expense		3.3	(32,000)	(105,600)
Utilities expense		3.3	(5,500)	(18,150)
Net income before FX Adjustments				172,380
FX Adjustment				(27,700)
Net Income after Fx Adjustents				144,680
Gain on sale of Building	KR	Exchange Rate	USD
Cash received	24700	3.6	88920
Assets cost	-17500	2.8	-49000
	7200		39920
Retained Earning- Opening				145200
Add: Net Profit $				144,680
Dividends (10/1/17)		3.5	(44,000)	(154,000)
Closing Retained earning				135,880

B)

Current Method
Assets	Exchange rate	Amount in KR	Amount in USD
Accounts receivable	3.6	91000	327600
Cash	3.6	9200	33120
Buildings	3.6	98500	354600
Equipment	3.6	42000	151200
Total Assets		240700	866520
Accounts payable	3.6	19500	70200
Accumulated depreciation—buildings	3.6	37000	133200
Accumulated depreciation—equipment	3.6	6200	22320
Bonds payable—due 2020	3.6	51000	183600
Common stock	3.0	71000	213000
	3.2	14000	44800
Retained earnings		42000	149850
Translation Adj			49550
		240700	866520
Sales	3.3	117000	386100
Depreciation expense	3.3	-27000	-89100
Gain on sale of building	2.8	7200	20160
Rent expense	3.3	-15700	-51810
Salary expense	3.3	-32000	-105600
Utilities expense	3.3	-5500	-18150
Net income		44000	141600
Retained Earning- Opening		42000	162250
Add: Net Profit $		44000	141600
Dividends (10/1/17)	3.5	-44000	-154000
Closing Retained earning		42000	149850
Transaltion Adjstment
Opening			9650
For the year 2017			40300
Closing			49950