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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 $ CHF On December the book and fair values of the subsidiarys assets and liabilities were as follows:
Cash CHF
Inventory
Property, plant, and equipment
Notes payable
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:
Determine the translation adjustment to be reported on Stephkados December consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiarys functional currency. What is the economic relevance of this translation adjustment?
Determine the remeasurement gain or loss to be reported in Stephkados 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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