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	16,770		Notes payable	NGN	20,340
Inventory		11,700		Common stock		22,100
Land		4,170		Retained earnings		11,050
Building		41,700
Accumulated depreciation		(20,850	)
	NGN	53,490			NGN	53,490

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 8,170,000 NGN on the note payable.
May 1	Sold entire inventory for 17,700,000 NGN on account.
June 1	Sold land for 6,170,000 NGN cash.
Aug. 1	Collected all accounts receivable.
Sept.1	Signed long-term note to receive 8,170,000 NGN cash.
Oct. 1	Bought inventory for 20,170,000 NGN cash.
Nov. 1	Bought land for 3,170,000 NGN on account.
Dec. 1	Declared and paid 3,170,000 NGN cash dividend to parent.
Dec. 31	Recorded depreciation for the entire year of 2,085,000 NGN.

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

2008	NGN 1	=	$	0.0065
2010	1	=		0.0059
August 1, 2016	1	=		0.0079
December 31, 2016	1	=		0.0081
February 1, 2017	1	=		0.0083
May 1, 2017	1	=		0.0085
June 1, 2017	1	=		0.0087
August 1, 2017	1	=		0.0091
September 1, 2017	1	=		0.0093
October 1, 2017	1	=		0.0095
November 1, 2017	1	=		0.0097
December 1, 2017	1	=		0.0099
December 31, 2017	1	=		0.0118
Average for 2017	1	=		0.0108

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

PART – I)

The translation adjustment is computed as follows by using the following formula in excel sheet:

The translation adjustment is computed as follows by using the above formula in excel sheet:

PART – II)

The remeasurement gain is computed as follows by using the following formula in excel sheet:

The remeasurement gain is computed as follows by using the above formula in excel sheet: