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	16,740		Notes payable	NGN	20,280
Inventory		11,400		Common stock		21,800
Land		4,140		Retained earnings		10,900
Building		41,400
Accumulated depreciation		(20,700	)
	NGN	52,980			NGN	52,980

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 8,140,000 NGN on the note payable.
May 1	Sold entire inventory for 17,400,000 NGN on account.
June 1	Sold land for 6,140,000 NGN cash.
Aug. 1	Collected all accounts receivable.
Sept.1	Signed long-term note to receive 8,140,000 NGN cash.
Oct. 1	Bought inventory for 20,140,000 NGN cash.
Nov. 1	Bought land for 3,140,000 NGN on account.
Dec. 1	Declared and paid 3,140,000 NGN cash dividend to parent.
Dec. 31	Recorded depreciation for the entire year of 2,070,000 NGN.

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

2008	NGN 1	=	$	0.0062
2010	1	=		0.0056
August 1, 2016	1	=		0.0076
December 31, 2016	1	=		0.0078
February 1, 2017	1	=		0.0080
May 1, 2017	1	=		0.0082
June 1, 2017	1	=		0.0084
August 1, 2017	1	=		0.0088
September 1, 2017	1	=		0.0090
October 1, 2017	1	=		0.0092
November 1, 2017	1	=		0.0094
December 1, 2017	1	=		0.0096
December 31, 2017	1	=		0.0112
Average for 2017	1	=		0.0102

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

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

Answer 1

a)

Particulars	Amount (NGN)	Rate per NGN	Amount ($)
Net asset Balance, 1/1	32700000	$0.0078	255060
Increases in net assets :-
Sold inventory at a Profit, 1/5	6000000	$0.0082	49200
Sold land at a gain, 1/6	2000000	$0.0084	16800
Decreases in net assets :-
Paid a dividend, 1/12	(3140000)	$0.0096	(30144)
Depreciation Recorded	(2070000)	$0.0102	(21114)
Net Assets Balance, 31/12	35490000		269802
Net Assets Balance, 31/12
at current exchange rate	35490000	$0.0112	397488
Translation adjustment - Positive			(127686)

b)

Particulars	Amount (NGN)	Rate per NGN	Amount ($)
Net monetary Liability Balance, 1/1	(4000000)	$0.0078	(31200)
Increases in net assets :-
Sold inventory at a Profit, 1/5	17400000	$0.0082	142680
Sold land at a gain, 1/6	6140000	$0.0084	51576
Decreases in net assets :-
Bought Inventory, 1/10	(20140000)	$0.0092	(185288)
Bought Land, 1/11	(3140000)	$0.0094	(29516)
Paid a dividend, 1/12	(3140000)	$0.0096	(30144)
Net monetary Liability Balance, 31/12	(6880000)		(81892)
Net monetary Liability Balance, 31/12 at current exchange rate	(6880000)	$0.0112	(77056)
Remeasurement Gain			4836