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On December 1 8 , 2 0 2 4 , Stephkado Corporation acquired 1 0 0 percent of a Swiss company for 4 . 0
On December Stephkado Corporation acquired percent of a Swiss company for million Swiss francs CHF which is
indicative of book and fair value. At the acquisition date, the exchange rate was $ On December the book and
fair values of the subsidiary's assets and liabilities were as follows:
Stephkado prepares consolidated financial statements on December By that date, the Swiss franc has appreciated to $
CHF Because of the yearend holidays, no transactions took place prior to consolidation. Property, plant, and equipment is
depreciated using a unitsofproduction method, so no depreciation is required from December to December The Swiss
subsidiary has no revenues and no expenses from December to December and its book value is unchanged from December
to December
Required:
a Determine the translation adjustment to be reported on Stephkado's December consolidated balance sheet, assuming
that the Swiss franc is the Swiss subsidiary's functional currency. What is the economic relevance of this translation adjustment?
b Determine the remeasurement gain or loss to be reported in Stephkado's consolidated net income, assuming that the US
dollar is the functional currency. What is the economic relevance of this remeasurement gain or loss?
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