Slocome Travel owns a travel agency that operates in London. Account balances in pounds for the subsidiary are summarized below:

Exchange rates for the British pound for 2019 were as follows:

January 1 ............................... ? ?$1.5403December 31 ........................ ? ? ?1.5961Average for year ................... ? ? 1.5532

The subsidiary did not make any purchases of office supplies or plant assets during the year. Revenues were earned and operating expenses, other than depreciation and supplies used, were incurred evenly throughout the year.

Required:

A. Prepare a schedule to compute the translation adjustment for the year, assuming the foreign entity?s functional currency is the pound.?

B. Prepare a schedule to compute the translation gain or loss, assuming the foreign entity?s functional currency is the U.S. dollar.

C. Explain why your results differ under the two methods.

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2019 January 1 December 31 Cash and Receivables 32,000 35,000 Office Supplies 1,500 900 65,000 Land, Building, and Equipment 70,000 Accounts Payable (6,900) (15,500) Long-Term Note Payable (25,000) (15,000) Common Stock (40,000) (40,000) Retained Earnings (23,000) (23,000) Dividends-Declared and Paid on December 31 4,000 Revenues (40,000) Operating Ex penses 20,000 Totals