Question
Gonzales Co. starts a foreign subsidiary on January 1 by investing 10,000 FCU. Gonzales owns all of the shares of the subsidiary's common stock. The
Gonzales Co. starts a foreign subsidiary on January 1 by investing 10,000 FCU. Gonzales owns all of the shares of the subsidiary's common stock. The foreign subsidiary generates 20,000 FCU of net income throughout the year and pays no dividends. The FCU is the foreign subsidiary's functional currency. Currency exchange rates for 1 FCU are as follows:
January 1 ..................................................$0.50 = 1 FCU
Average for the year .............................. $0.56 = 1 FCU
December 31 ...........................................$0.45 = 1 FCU
In preparing consolidated financial statements, what translation adjustment will Gonzales report at the end of the current year?
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