Question
On January 1, 2021, Baker Co., a U.S. corporation with the U.S. dollar as its functional currency, established Ramirez Co. as a subsidiary. Ramirez is
On January 1, 2021, Baker Co., a U.S. corporation with the U.S. dollar as its functional currency, established Ramirez Co. as a subsidiary. Ramirez is located in the country of Lalique, and its functional currency is the Trinket (T). Ramirez engaged in the following transactions during 2021:
January 1, 2021 |
Issued common stock for 600,000 Trinkets. |
June 25, 2021 | Sold a patent at a gain of 75,000 Trinkets. |
August 1, 2021 | Paid dividends of 53,000 Trinkets. |
Ramirezs operating revenues and expenses for 2021 were 900,000 Trinkets and 750,000 Trinkets, respectively. The appropriate exchange rates were:
January 1, 2021 1 Trinket = $3.50
June 25, 2021 1 Trinket = $3.20
August 1, 2021 1 Trinket = $3.70
December 31, 2021 1 Trinket = $3.80
Average for 2021 1 Trinket = $3.40
Required:
a. Calculate the translation adjustment for Ramirez. (Round your answers to the nearest whole dollar.)
b. What is the purpose of the translation adjustment?
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