Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Christina Company (a U.S.-based company) has a subsidiary in Canada that began operations at the start of 2020 with assets of 139,000 Canadian dollars (CAD)

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

Christina Company (a U.S.-based company) has a subsidiary in Canada that began operations at the start of 2020 with assets of 139,000 Canadian dollars (CAD) and liabilities of CAD 68,000. During this initial year of operation, the subsidiary reported a profit of CAD 33,000. It distributed two dividends, each for CAD 5,700 with one dividend declared on March 1 and the other on October 1. Applicable U.S. dollar (\$) exchange rates for 1 Canadian dollar follow: a. Assume that the Canadian dollar is this subsidiary's functional currency. What translation adjustment would the company report for the year 2020 ? b. Assume that on October 1, 2020, Christina entered into a forward exchange contract to hedge the net investment in this subsidiary. On that date, the company agreed to sell CAD 270,000 in three months at a forward exchange rate of \$0.72/CAD1. Prepare the journal entries required by this forward contract. c. Compute the net translation adjustment the company will report in accumulated other comprehensive income for the year 2020 under this second set of circumstances. Assume that the Canadian dollar is this subsidiary's functional currency. What translation adjustment would the company report for the year 2020? Assume that on October 1,2020 , Christina entered into a forward exchange contract to hedge the net investment in this subsidiar that date, the company agreed to sell CAD 270,000 in three months at a forward exchange rate of $0.72/ CAD 1. Prepare the journ entries required by this forward contract. (If no entry is required for a transaction/event, select "No journal entry required" in the account field.) 1 Record the entry for the Board being entered into a forward exchange contract. 2 Record the change in the value of the forward contract. 3 Record the purchase of foreign currency. 4 Record the delivery of the foreign currency and the closing of forward contract account. Credit Compute the net translation adjustment the company will report in accumulated other comprehensive income for the year 2020 under this second set of circumstances

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles of Accounting

Authors: Needles, Powers, crosson

11th Edition

1439037744, 978-1133626985, 978-1439037744

More Books

Students also viewed these Accounting questions

Question

Evaluate the importance of the employee handbook.

Answered: 1 week ago

Question

Discuss the steps in the progressive discipline approach.

Answered: 1 week ago