Question

The following account balances are for the Agee Company as of January 1, 2017, and December 31, 2017. All amounts are denominated in kroner (Kr).

	January 1, 2017			December 31, 2017
Accounts payable		(10,000	)		(21,500	)
Accounts receivable		33,000			83,000
Accumulated depreciation—buildings		(24,000	)		(29,000	)
Accumulated depreciation—equipment		0			(5,400	)
Bonds payable—due 2020		(54,000	)		(54,000	)
Buildings		113,000			94,500
Cash		39,000			8,400
Common stock		(63,000	)		(76,000	)
Depreciation expense		0			19,000
Dividends (10/1/17)		0			36,000
Equipment		0			34,000
Gain on sale of building		0			(6,400	)
Rent expense		0			16,400
Retained earnings		(34,000	)		(34,000	)
Salary expense		0			24,000
Sales		0			(96,000	)
Utilities expense		0			7,000

Additional Information

Agee issued additional shares of common stock during the year on April 1, 2017. Common stock at January 1, 2017, was sold at the start of operations in 2010.

Agee purchased buildings in 2011 and sold one building with a book value of Kr 13,500 on July 1 of the current year.

Equipment was acquired on April 1, 2017.

Relevant exchange rates for 1 Kr were as follows:

2010	$	2.60
2011		2.40
January 1, 2017		2.70
April 1, 2017		2.80
July 1, 2017		3.00
October 1, 2017		3.10
December 31, 2017		3.20
Average for 2017		2.90

Assuming the U.S. dollar is the functional currency, what is the remeasurement gain or loss for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $145,200, which included a remeasurement loss of $28,300.

Assuming the foreign currency is the functional currency, what is the translation adjustment for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $162,250, and a cumulative translation adjustment of $9,650 (credit balance).

a	remeasurement	gain or loss
b	translation adjustment	positive or negative

Answer 1

Part A

Remeasurement - gain -13325

	KR	Exchange rate	U.S.
Net monetary assets (cash + accounts receivable) - (accounts payable + bonds payable) = (39000+33000)-(10000+54000)	8000	2.70	21600
Increase in net monetary assets
Issued common stock (4/1/17) (76000-63000)	13000	2.80	36400
Sold building 7/1/17 (13500+6400)	19900	3.00	56935
Sales (2017)	96000	2.90	278400
Decrease in net monetary assets
Purchased equipment (4/1/17)	34000	2.80	95200
Paid dividends (10/1/17)	36000	3.10	111600
Rent expenses(2017)	16400	2.90	47560
Salary expenses (2017)	24000	2.90	69600
Utilities expenses (2017)	7000	2.90	20300
Net monetary assets 12/31/17	19500		49075
Net monetary assets 12/31/17 at current exchange rate	19500	3.20	(62400)
Remeasurement (gain)			(13325)

Part B

Translation adjustment - positive - 72260

	KR	Exchange rate	U.S
Net assets 1/1/17 (33000+113000+39000-10000-54000)	121000	2.70	326700
Increase in net assets
Issued common stock 4/1/17	13000	2.80	36400
Gain on sale of building** 7/1/17	6400	3.00	19200
Sales (2017)	96000	2.90	278400
Decreases in net assets :
Paid dividend 10/1/17	36000	3.10	111600
Depreciation expense (2017)	19000	2.90	55100
Rent expense (2017)	16400	2.90	47560
Salary expense (2017)	24000	2.90	69600
Utilities expense (2017)	7000	2.90	20300
Net assets, 12/31/17	134000		356540
Net assets, 12/31/17 at current exchange rate	134000	3.20	(428800)
Translation adjustment positive			(72260)