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	16,820		Notes payable	NGN	20,440
Inventory		12,200		Common stock		22,600
Land		4,220		Retained earnings		11,300
Building		42,200
Accumulated depreciation		(21,100	)
	NGN	54,340			NGN	54,340

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 8,220,000 NGN on the note payable.
May 1	Sold entire inventory for 18,200,000 NGN on account.
June 1	Sold land for 6,220,000 NGN cash.
Aug. 1	Collected all accounts receivable.
Sept.1	Signed long-term note to receive 8,220,000 NGN cash.
Oct. 1	Bought inventory for 20,220,000 NGN cash.
Nov. 1	Bought land for 3,220,000 NGN on account.
Dec. 1	Declared and paid 3,220,000 NGN cash dividend to parent.
Dec. 31	Recorded depreciation for the entire year of 2,110,000 NGN.

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

2008	NGN 1	=	$	0.0070
2010	1	=		0.0064
August 1, 2016	1	=		0.0084
December 31, 2016	1	=		0.0086
February 1, 2017	1	=		0.0088
May 1, 2017	1	=		0.0090
June 1, 2017	1	=		0.0092
August 1, 2017	1	=		0.0096
September 1, 2017	1	=		0.0098
October 1, 2017	1	=		0.0100
November 1, 2017	1	=		0.0102
December 1, 2017	1	=		0.0104
December 31, 2017	1	=		0.0128
Average for 2017	1	=		0.0118

Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2017?

Assuming the U.S.$ is the subsidiary's functional currency, what is the remeasurement gain or loss determined solely for 2017?

a.Positivetranslation adjustment: ?

b.Remeasurement gain: ?

Answer 1

a)

Particulars	Amount (NGN)	Rate per NGN	Amount ($)
Net asset Balance, 1/1	33900000	$0.0086	291540
Increases in net assets :-
Sold inventory at a Profit, 1/5	6000000	$0.0090	54000
Sold land at a gain, 1/6	2000000	$0.0092	18400
Decreases in net assets :-
Paid a dividend, 1/12	(3220000)	$0.0104	(33488)
Depreciation Recorded	(2110000)	$0.0118	(24898)
Net Assets Balance, 31/12	36570000		305554
Net Assets Balance, 31/12
at current exchange rate	36570000	$0.0128	468096
Translation adjustment - Positive			(162542)

b)

Particulars	Amount (NGN)	Rate per NGN	Amount ($)
Net monetary Liability Balance, 1/1	(4000000)	$0.0086	(34400)
Increases in net assets :-
Sold inventory at a Profit, 1/5	18200000	$0.0090	163800
Sold land at a gain, 1/6	6220000	$0.0092	57224
Decreases in net assets :-
Bought Inventory, 1/10	(20220000)	$0.0100	(202200)
Bought Land, 1/11	(3220000)	$0.0102	(32844)
Paid a dividend, 1/12	(3220000)	$0.0104	(33488)
Net monetary Liability Balance, 31/12	(6240000)		(81908)
Net monetary Liability Balance, 31/12 at current exchange rate	6240000	$0.0128	(79872)
Remeasurement Gain			(2036)