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 16,760	Notes payable	NGN  20,320
Inventory	11,600	Common stock	22,000
Land	4,160	Retained earnings NGN	11,000
Building	41,600
Accumulated depreciation	(20,800)
	NGN 53,320		NGN 53,320

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, 160,000 NGN on the note payable.

May 1 Sold entire inventory for 17,600,000 NGN on account.

June 1 Sold land for 6, 160,000 NGN cash.

Aug. 1 collected all accounts receivable. 

Sept.1  Signed long-term note to receive 8, 160,000 NGN cash.

Oct. 1 Bought inventory for 20, 160,000 NGN cash.

Nov. 1 Bought land for 3, 160,000 NGN on account.

Dec. 1 Declared and paid 3,160,000 NGN cash dividend to parent. 

Dec. 31      Recorded depreciation for the entire year of 2,000,000 NGN. 

The US dollar ($) exchange rates for 1 NGN are as follows: 

Answer 1

The question is missing the rates following 0.0092... but assuming the rate was $0.0094 ,  $0.0096 ,  $0.0098 , $0.0118 , $0.0108 respectively we conclude the following answers. 

 

Part A

Net asset balance = All assets - Liabilities = Cash + Inventory + Land + Building - Accum. Dep. - Notes Payable = 53,320 - 20,320 = 33,000*1000 = 33,000,000 * 0.0080 = 264,000 [rate from December 31]

May 1: Sold inventory 17,600,000 - Inventory (11,600*1000) = 17,800,000 - 11,600,000 =  6,000,000 * 0.0084 May 1 rate = 50,400

Jun 1: Sold Land 6,160,000 - Land (4,160*1000) = 6,160,000-4,160,000 =  2,000,000 *0.0086 = 17,200

Nov. 1: -3,160,000*0.0098=-30,968

Dec. 31: -2,080,000*0.0108=-22,464

Adding 264,000+50,400+17,200-30,968-22,464=278,168

Adding 33,000,000+6,000,000+2,000,000-3,160,000-2,080,000 = 35,760,000 * 0.0118 = 421,968

421,968-278,168=143,800 ANSWER FOR PART A

 

Part B

Net liab=Notes Payable-Cash=(20,320-16,760)*1000= -3,560,000*0.080 (Dec 31 rate) = -28,480

May 1. Sold inventory = 17,600,000 * 0.0084 (May 1 rate)= 147,840

June 1 Sold land: 6,160,000 * 0.0086 (Jun 1 rate)=52,976

Oct. 1 Bought inventory: -20,160,000 * 0.0094 (Oct. 1 rate) = -189,504

Nov. 1 Land: -3,160,000 * 0.0096 (Nov 1 rate) = -30,336

Dec. 1 Div: -3,160,000 * 0.0098 (Dec 1 rate) = -30,968

-28,480+147,840+52,976-189,504-30,336-30,968=-78,472

-3,560,000+17,600,000+6,160,000-20,160,000-3,160,000-3,160,000 = -6,280,000 * 0.0118 (Dec 31 rate) = -74,104

 

-74,104+78,472=4,368 ANSWER FOR PART B