Question

Massmart, the second largest retailer in Africa, is a subsidiary of Wal-Mart Inc., a U.S. company. Massmart reports its accounts in its local currency, the rand (R). Wal-Mart’s fiscal year ends January 31. On February 1, 2018, Massmart reports facilities with original cost of R500 million and accumulated depreciation of R280 million in its noncurrent assets, as follows:

• Buildings acquired at a cost of R175 million when the exchange rate was $0.15/R, with accumulated depreciation of R100 million. The buildings are being depreciated on a straight-line basis over 25 years.

• Equipment acquired at a cost of R325 million when the exchange rate was $0.12/R, with accumulated depreciation of R180 million. The equipment is being depreciated on a straight-line basis over 10 years.

Additional exchange rates:

February 1, 2018	$0.10
Average for fiscal 2019	0.08
January 31, 2019	0.07

Massmart still holds these facilities at January 31, 2019.

Required

a. Assume that Massmart’s functional currency is the rand. Calculate Massmart’s translated facilities, at cost, and related accumulated depreciation, at January 31, 2019, and its translated depreciation expense for fiscal 2019.

b. Now assume that Massmart’s functional currency is the U.S. dollar. Calculate Massmart’s remeasured facilities, at cost, and related accumulated depreciation, at January 31, 2019, and its remeasured depreciation expense for fiscal 2019.

Enter answers using all zeros (do not abbreviate to millions or thousands).

I am able to figure the facilities at cost but having problems with the rest

Answer 1

a. when Massmart's functional currency is rand.

The amount of facilities as on January 31, 2019

Building R175 million

Less: Accumulated depreciation R100 million

Less: Depreciation for the fiscal 2019 R 7 million

(R 175 million / 25 years = R 7 million)

Net amount of builiding R 68 million

Equipment R 325 million

Less: Accumulated depreciation R180 million

Less: Depreciation for the fiscal 2019 R 32.5 million

(R 325 million / 10 years = R 32.5 million)

Net amount of equipment R 112.5 million

Total amount of facilities R 180.5 million

b. When Massmart's functional currency is US dollar

The amount of facilities as on January 31, 2019

Building R175 million x $0.15 = $ 26.25 million

Less: Accumulated depreciation R100 million X $0.10 = $ 10 million

Less: Depreciation for the fiscal 2019 R 7 million x $0.07 = $0.49 million

(R 175 million / 25 years = R 7 million)

Net amount of builiding $ 15.76 million

Equipment R 325 million X $ 0.12 = $ 39 million

Less: Accumulated depreciation R180 million X $0.10 = $ 18 million

Less: Depreciation for the fiscal 2019 R 32.5 million x $ 0.07 = $ 2.275 million

(R 325 million / 10 years = R 32.5 million)

Net amount of equipment $ 18.725 million

Total amount of facilities $ 34.485 million