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	15,450		Notes payable	NGN	20,100
Inventory		10,500		Common stock		20,100
Land		4,050		Retained earnings		10,050
Building		40,500
Accumulated depreciation		(20,250)
	NGN	50,250			NGN	50,250

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 8,050,000 NGN on the note payable.
May 1	Sold entire inventory for 16,500,000 NGN on account.
June 1	Sold land for 6,050,000 NGN cash.
Aug. 1	Collected all accounts receivable.
Sept.1	Signed long-term note to receive 8,050,000 NGN cash.
Oct. 1	Bought inventory for 20,050,000 NGN cash.
Nov. 1	Bought land for 3,050,000 NGN on account.
Dec. 1	Declared and paid 3,050,000 NGN cash dividend to parent.
Dec. 31	Recorded depreciation for the entire year of 2,025,000 NGN.

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

2008	NGN 1	=	$	0.0053
2010	1	=		0.0047
August 1, 2016	1	=		0.0067
December 31, 2016	1	=		0.0069
February 1, 2017	1	=		0.0071
May 1, 2017	1	=		0.0073
June 1, 2017	1	=		0.0075
August 1, 2017	1	=		0.0079
September 1, 2017	1	=		0.0081
October 1, 2017	1	=		0.0083
November 1, 2017	1	=		0.0085
December 1, 2017	1	=		0.0087
December 31, 2017	1	=		0.0094
Average for 2017	1	=		0.0084

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?

   (Input all amounts as positive. Enter amounts in whole dollars.)

Answer 1

Ans.

Calculation of Net Asset Balance on 1/1
Particulars	Amount
Cash	15,450.00
Add: Inventory	10,500.00
Add:Land	4,050.00
Add: Building	40,500.00
Less: Accumulated Depreciation	(20,250.00)
Less : Notes Payable	(20,100.00)
Net Asset Balance	30,150.00

a)

Particulars	NGN (a)	Exchange Rate (b)	Amount in $ (a * b)
Net Asset balance 1/1	30,150.00	0.0069	$         208.04
Add: Increase in net assets :
Profit on inventory sold 5/1	6,000.00	0.0073	$           43.80
Gain on land sold 6/1	2,000.00	0.0075	$           15.00
Less: Decreased in net assets :
Dividend paid 12/1	3,050.00	0.0087	$           26.54
Recorded Depreciation 12/31	2,025.00	0.0094	$           19.04
Net Asset balance 12/31 (a)	33,075.00		$         221.27
Net Asset balance 12/31 at current exchange rate (b)	33,075.00	0.0094	$         310.91
Translation Adjustment -Positive (b-a)			$           89.64

b)

Note

Calculation of beginning net monetary liability position :
Particulars	Amount
Cash	15,450.00
Less: Notes Payable	(20,100.00)
Beginning net Monetary liability position	(4,650.00)

Calculation of remeasurement gain or loss

Particulars	NGN	Exchange Rate	Amount in $
Beginning net monetary liability position	(4,650.00)	0.0069	$          (32.09)
Add: Increased in monetary assets :
inventory sold 5/1	16,500.00	0.0073	$         120.45
land sold on 6/1	6,050.00	0.0075	$           45.38
Less: Decreased In monetary assets :
Inventory Bought on 10/1	(20,050.00)	0.0083	$        (166.42)
Land bought on 11/1	(3,050.00)	0.0085	$          (25.93)
Dividend paid on 12/1	(3,050.00)	0.0087	$          (26.54)
Ending Net monetary liability position	(8,250.00)		$          (85.14)
Ending Net monetary liability position at current exchange rate	(8,250.00)	0.0094	$          (77.55)
Re measurement Gain - 7.58