Question

Watson Company has a subsidiary in the country of Alonza where the local currency unit is the kamel (KM). On December 31, 2014, the subsidiary has the following balance sheet:

Cash	KM	15,000	Notes payable (due 2016)	KM	28,500
Inventory		23,500	Common stock		30,000
Land		5,000	Retained earnings		15,000
Building		60,000
Accumulated depreciation		(30,000)
	KM	73,500		KM	73,500

The subsidiary acquired the inventory on August 1, 2014, and the land and buildings in 2000. It issued the common stock in 1998. During 2015, the following transactions took place:

2015
Feb. 1	Paid 16,000 KM on the note payable.
May 1	Sold entire inventory for 31,500 KM on account.
June 1	Sold land for 6,100 KM cash.
Aug. 1	Collected all accounts receivable.
Sept.1	Signed long-term note to receive 10,500 KM cash.
Oct. 1	Bought inventory for 15,000 KM cash.
Nov. 1	Bought land for 5,000 KM on account.
Dec. 1	Declared and paid 4,000 KM cash dividend to parent.
Dec. 31	Recorded depreciation for the entire year of 3,000 KM.

The exchange rates for 1 KM are as follows:

1998	1 KM	=	$	0.26
2000	1	=		0.24
August 1, 2014	1	=		0.34
December 31, 2014	1	=		0.36
February 1, 2015	1	=		0.38
May 1, 2015	1	=		0.40
June 1, 2015	1	=		0.42
August 1, 2015	1	=		0.44
September 1, 2015	1	=		0.46
October 1, 2015	1	=		0.48
November 1, 2015	1	=		0.50
December 1, 2015	1	=		0.52
December 31, 2015	1	=		0.56
Average for 2015	1	=		0.46

If this is a translation, what is the translation adjustment determined solely for 2015?

Answer 1

	Particulars	Amount (KM)		Exchange rate	(KM)
	Net asset balance 1/1	43,500	X	0.36	15,660
	Increase in Net assets iincome):
	Sold Inventory at a profit 5/1	8,000	X	0.40	3,200
	Sold land at a profit 6/1	1,100	X	0.42	462
	Decrease in Net assets:
	Dividend paid 12/1	-4,000	X	0.52	-2,080
	Depreciation recorded	-3,000	X	0.46	-1,380
	Net asset balance 12/31	45,600			15,862
Less:	Net asset balance 12/31 at current exchange rate	45,600	X	0.56	25,536
	Translation adjustment - positive				-9,674
	Working notes:
	Net asset balance 1/1
	Cash	15,000
	Inventory	23,500
	Land	5,000
		43,500
	Sold Inventory at a profit 5/1
	Selling price	31,500
	Cost	23,500
	Profit	8,000
	Sold land at a profit 6/1
	Selling price	6,100
	Cost	5,000
	Profit	1,100
	Particulars	Amount (KM)		Exchange rate	(KM)
	Beginning Net Monetary
	Liability Position	-13,500	X	0.36	-4,860
	Increases in monetary assets:
	Sold Inventory 5/1	31,500	X	0.40	12,600
	Sold land 6/1	6,100	X	0.42	2,562
	Decrease in monetary assets:
	Bought inventory 10/1	-15,000	X	0.48	-7,200
	Bought land 11/1	-5,000	X	0.50	-2,500
	Dividend paid 12/1	-4,000	X	0.52	-2,080
	Ending Net monetary liability position	100			-1,478
Less:	Ending Net monetary liability position at current exchange rate	100	X	0.56	56
	Remeasurement Gain				-1,534
	Working notes:
	Beginning Net Monetary
	Note Payable	28,500
Less:	Cash	15,000
	Liability Position	13,500