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	16,400		Notes payable	NGN	20,200
Inventory		11,000		Common stock		21,200
Land		4,100		Retained earnings		10,600
Building		41,000
Accumulated depreciation		(20,500	)
	NGN	52,000			NGN	52,000

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 8,100,000 NGN on the note payable.
May 1	Sold entire inventory for 17,000,000 NGN on account.
June 1	Sold land for 6,100,000 NGN cash.
Aug. 1	Collected all accounts receivable.
Sept.1	Signed long-term note to receive 8,100,000 NGN cash.
Oct. 1	Bought inventory for 20,100,000 NGN cash.
Nov. 1	Bought land for 3,100,000 NGN on account.
Dec. 1	Declared and paid 3,100,000 NGN cash dividend to parent.
Dec. 31	Recorded depreciation for the entire year of 2,050,000 NGN.

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

2008	NGN 1	=	$	0.0058
2010	1	=		0.0052
August 1, 2016	1	=		0.0072
December 31, 2016	1	=		0.0074
February 1, 2017	1	=		0.0076
May 1, 2017	1	=		0.0078
June 1, 2017	1	=		0.0080
August 1, 2017	1	=		0.0084
September 1, 2017	1	=		0.0086
October 1, 2017	1	=		0.0088
November 1, 2017	1	=		0.0090
December 1, 2017	1	=		0.0092
December 31, 2017	1	=		0.0104
Average for 2017	1	=		0.0094

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

b. 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.)

a.		translation adjutment
b.

Answer 1

a)	Net asset balance 1/1	31,800,000.00	X	0.0074	=	$    235,320.00
	Increases in net assets (income):
	Sold inventory at a profit, 5/1	6,000,000.00	X	0.0078	=	$      46,800.00
	Sold land at a gain, 6/1	2,000,000.00	X	0.008	=	$      16,000.00
	Decreases in net assets:
	Paid a dividend, 12/1	(3,100,000.00)	X	0.0092	=	$    (28,520.00)
	Depreciation recorded	(2,050,000.00)	X	0.0094	=	$    (19,270.00)
	Net asset balance, 12/31	34,650,000.00				$    250,330.00
	Net asset balance, 12/31 at current exchange rate	34,650,000.00	X	0.0104	=	$ (360,360.00)
	Translation adjustment—positive					$ (110,030.00)

b)	Net monetary liability position, 1/1	(3,800,000.00)	X	0.0074	=	$    (28,120.00)
	Increases in monetary assets:
	Sold inventory, 5/1	17,000,000.00	X	0.0078	=	$    132,600.00
	Sold land, 6/1	6,100,000.00	X	0.008	=	$      48,800.00
	Decreases in monetary assets:
	Bought inventory, 10/1	(20,100,000.00)	X	0.0088	=	$ (176,880.00)
	Bought land, 11/1	(3,100,000.00)	X	0.009	=	$    (27,900.00)
	Paid a dividend, 12/1	(3,100,000.00)	X	0.0092	=	$    (28,520.00)
	Net monetary liability position, 12/31	(7,000,000.00)				(80,020.00)
	Net monetary liability position, 12/31 at current exchange rate	(7,000,000.00)	X	0.0104	=	$    (72,800.00)
	Remeasurement gain					(7,220.00)