Question

Translation and Remeasurement Gain and Loss

Asda is a British supermarket chain owned by Wal-Mart Stores, Inc. Assume that the following data relate to Asda's activities for 2017 (in millions).

Net assets (liabilities) reported at fair value, January 1, 2017	£ 420
Acquisition of plant assets for debt, February 15, 2017	600
Purchase of inventory made evenly during 2017	2,100
Collection of receivables outstanding at January 1, 2017	1,620
Sales made evenly during 2017	3,600
Cost of goods sold	1,980
Depreciation of assets acquired when the exchange rate was $1.80/£	240
Current operating expenses (excluding depreciation and amortization), incurred evenly during 2017	720
Refinancing or "rollover" of commercial paper	480

Exchange rates ($/£) during 2017 are:

January 1, 2017	$1.14	Average for 2017	$1.18
February 15, 2017	1.17	December 31, 2017	1.20

(a) Assuming Asda's functional currency is the U.S. dollar, prepare a schedule to compute the remeasurement gain or loss for 2017

HINT: Not every fill-in box requires an answer. If an account is not used in the calculation, leave all corresponding fill-in answer boxes BLANK.

Enter all decimal places.

Use negative signs with answers that are reductions and to indicate a remeasurement loss.

(in millions)	Amount (£)	$/£	Amount ($)
Exposed position, 1/1/17	£Answer	Answer	$Answer
Acquisition of plant assets for debt	Answer	Answer	Answer
Purchase of inventory	Answer	Answer	Answer
Collection of receivables	Answer	Answer	Answer
Sales	Answer	Answer	Answer
Cost of goods sold	Answer	Answer	Answer
Depreciation expense	Answer	Answer	Answer
Refinancing of commercial paper	Answer	Answer	Answer
Operating expenses	Answer	Answer	Answer
			Answer
Exposed position, 12/31/17	£Answer	Answer	Answer
Remeasurement gain (loss)			$Answer

(b) Assuming Asda's functional currency is the pound, prepare a schedule to compute the translation gain or loss for 2017. Assume net assets on January 1, 2017, amounted to £1,200 million.

HINT: Not every fill-in box requires an answer. If an account is not used in the calculation, leave all corresponding fill-in answer boxes BLANK.

Enter all decimal places.

Use negative signs with answers that are reductions and to indicate a translation loss.

(in millions)	Amount (£)	$/£	Amount ($)
Exposed position, 1/1/17	£Answer	Answer	$Answer
Acquisition of plant assets for debt	Answer	Answer	Answer
Purchase of inventory	Answer	Answer	Answer
Collection of receivables	Answer	Answer	Answer
Net income	Answer	Answer	Answer
Refinancing of commercial paper	Answer	Answer	Answer
			$Answer
Exposed position, 12/31/17	£Answer	Answer	$Answer
Translation gain (loss)			$Answer

Answer 1