Velky s.r.o. (a Czech company) invests 1,200,000 schillings in a foreign subsidiary on January 1, Year 1.

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Velky s.r.o. (a Czech company) invests 1,200,000 schillings in a foreign subsidiary on January 1, Year 1. The subsidiary commences operations on that date and generates net income of 400,000 schillings during its first year of operations. No dividends are sent to the parent this year. Relevant exchange rates between Velky’s reporting currency (CZK) and the schilling are as follows: 

January 1, Year 1 CZK 0.82 Average, Year 1 0.85 December 31, Year 1 0.88


Required: 

Determine the amount of translation adjustment that Velky will report on its December 31, Year 1, balance sheet assuming that the schilling is the foreign subsidiary’s functional currency.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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International Accounting

ISBN: 978-1260466539

5th edition

Authors: Timothy Doupnik, Mark Finn, Giorgio Gotti, Hector Perera

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