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	16,240		Notes payable	NGN	20,180
Inventory		10,900		Common stock		21,000
Land		4,090		Retained earnings		10,500
Building		40,900
Accumulated depreciation		(20,450	)
	NGN	51,680			NGN	51,680

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 8,090,000 NGN on the note payable.
May 1	Sold entire inventory for 16,900,000 NGN on account.
June 1	Sold land for 6,090,000 NGN cash.
Aug. 1	Collected all accounts receivable.
Sept.1	Signed long-term note to receive 8,090,000 NGN cash.
Oct. 1	Bought inventory for 20,090,000 NGN cash.
Nov. 1	Bought land for 3,090,000 NGN on account.
Dec. 1	Declared and paid 3,090,000 NGN cash dividend to parent.
Dec. 31	Recorded depreciation for the entire year of 2,045,000 NGN.

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

2008	NGN 1	=	$	0.0057
2010	1	=		0.0051
August 1, 2016	1	=		0.0071
December 31, 2016	1	=		0.0073
February 1, 2017	1	=		0.0075
May 1, 2017	1	=		0.0077
June 1, 2017	1	=		0.0079
August 1, 2017	1	=		0.0083
September 1, 2017	1	=		0.0085
October 1, 2017	1	=		0.0087
November 1, 2017	1	=		0.0089
December 1, 2017	1	=		0.0091
December 31, 2017	1	=		0.0102
Average for 2017	1	=		0.0092

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?

(Input all amounts as positive. Enter amounts in whole dollars.)

Answer 1

ANSWER

a)	Net asset balance 1/1	31,500,000.00	X	0.0073	=	$    229,950.00
	Increases in net assets (income):
	Sold inventory at a profit, 5/1	6,000,000.00	X	0.0077	=	$      46,200.00
	Sold land at a gain, 6/1	2,000,000.00	X	0.0079	=	$      15,800.00
	Decreases in net assets:
	Paid a dividend, 12/1	(3,090,000.00)	X	0.0091	=	$    (28,119.00)
	Depreciation recorded	(2,045,000.00)	X	0.0092	=	$    (18,814.00)
	Net asset balance, 12/31	34,365,000.00				$    245,017.00
	Net asset balance, 12/31 at current exchange rate	34,365,000.00	X	0.0102	=	$ (350,523.00)
	Translation adjustment—positive					$ (105,506.00)

b)	Net monetary liability position, 1/1	(3,940,000.00)	X	0.0073	=	$    (28,762.00)
	Increases in monetary assets:
	Sold inventory, 5/1	16,900,000.00	X	0.0077	=	$    130,130.00
	Sold land, 6/1	6,090,000.00	X	0.0079	=	$      48,111.00
	Decreases in monetary assets:
	Bought inventory, 10/1	(20,090,000.00)	X	0.0087	=	$ (174,783.00)
	Bought land, 11/1	(3,090,000.00)	X	0.0089	=	$    (27,501.00)
	Paid a dividend, 12/1	(3,090,000.00)	X	0.0091	=	$    (28,119.00)
	Net monetary liability position, 12/31	(7,220,000.00)				(80,924.00)
	Net monetary liability position, 12/31 at current exchange rate	(7,220,000.00)	X	0.0102	=	$    (73,644.00)
	Remeasurement gain					(7,280.00)

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