1) A subsidiary's January 1 and December 31, 2018 trial balances appear below:

Dr (Cr)

January 1 December 31

Cash, receivables 1,700,000 2,000,000

Inventories , FIFO 3,000,000 3,500,000

Plant & equipment, net 32,000,000 53,000,000

Liabilities (20,600,000) (42,100,000)

Capital stock (4,000,000) (4,000,000)

Retained earnings, Beg. (12,100,000) (12,100,000)

Sales revenue -- (15,000,000)

Cost of sales 9,500,000

Out-of-pocket selling & administrative expense -- 4,200,000

Depreciation expense -- 1,000,000

Total 0 0

Exchange rates (U.S.$/) are as follows:

January 1, 2018 $1.10

Average for 2018 1.07

December 31, 2018 1.05

The subsidiary was acquired on January 1, 2018. Its sales, inventory purchases, and out-of-pocket selling and administrative expenses occurred evenly during the year. Equipment was purchased for 22,000,000 when the exchange rate was $1.08. Depreciation consists of 800,000 on plant & equipment acquired when the rate was $1.15, and 200,000 on plant & equipment acquired when the rate was $1.08. The ending inventory was purchased at the end of the year, and the beginning inventory was purchased at the end of the previous year.

If the subsidiary's functional currency is the U.S. dollar, what is the remeasurement gain or loss for 2018?

$628,000 loss

$1,589,000 gain

$811,000 loss

$791,000 gain

2)

Patents are on the books of a British subsidiary of a U.S. firm at a value of 44,000 pounds. The patents were acquired in 2016 when the exchange rate was 1 pound = $1.60. The British subsidiary was acquired by the U.S. firm in 2010 when the exchange rate was 1 pound = $1.55. The exchange rate on December 31, 2017, the date of the most current balance sheet, is 1 pound = $1.70. The average rate of exchange for 2017 is $1.73. Assuming the dollar is the functional currency of the subsidiary, what exchange rate will be used to remeasure patents for the consolidated statements dated December 31, 2017?

$1.70

$1.55

$1.60

$1.73