Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On December 1 8 , 2 0 2 4 , Stephkado Corporation acquired 1 0 0 percent of a Swiss company for 4 . 0

On December 18,2024, Stephkado Corporation acquired 100 percent of a Swiss company for 4.019 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00= CHF 1. On December 18,2024, the book and fair values of the subsidiarys assets and liabilities were as follows:
Cash CHF 819,000
Inventory 1,319,000
Property, plant, and equipment 4,019,000
Notes payable (2,138,000)
Stephkado prepares consolidated financial statements on December 31,2024. By that date, the Swiss franc has appreciated to $1.10= CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation. Property, plant, and equipment is depreciated using a units-of-production method, so no depreciation is required from December 18 to December 31. The Swiss subsidiary has no revenues and no expenses from December 18 to December 31, and its book value is unchanged from December 18 to December 31.
Required:
Determine the translation adjustment to be reported on Stephkados December 31,2024, 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 2024 consolidated net income, assuming that the U.S. dollar is the functional currency. What is the economic relevance of this remeasurement gain or loss?

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_2

Step: 3

blur-text-image_3

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

Corporate Finance Demystified

Authors: Troy Adair

1st Edition

0071459103, 9780071459105

More Books

Students also viewed these Accounting questions

Question

Armed conflicts.

Answered: 1 week ago

Question

Pollution

Answered: 1 week ago