P Corporation, a U.S. Company, invested 60,000 pound sterling () to create a subsidiary, S Company, in United Kingdom on January 1, 2020. Additional information for S is as follows: 1. On January 1, 2020. S purchased inventory in cash for 55,000 that it sold all evenly throughout the year for 90,000 cash. (Hint: so, sales are 90,000 and cost of goods sold is 55,000.) 2. On May 1, 2020. S purchased 85,000 equipment, 45,000 in cash and 40,000 on account to be paid in 2021. Depreciation expense on the equipment for 2020 is 6,000. (Hint: So, how much is the amount of equipment net of accumulated depreciation?) Other than cost of goods sold and depreciation, S did not incur other expenses. 3. On October 1, 2020. S paid 15,000 as cash dividends. 4. Fiscal year-end is December 31 for both P and S. Exchange rates forspound sterling were as follows: January 1, 2020 $1.30 May 1, 2020 1.33 October 1, 2020 1.36 December 31, 2020 1.37 2020 average 1.35 If the current rate method is used to restate this subsidiary's financial statements from pound sterling to U.S. dollars, how much is the amount of translation gain or loss? Hints. For the current rate method, what financial statement items are translated using the current rate? The net amount for those items has a beginning balance of 60,000 and an ending balance of 74,000. ii. Think about the trend of the foreign exchange rates: has pound sterling appreciated or depreciated? January 1, 2020 $1.30 May 1, 2020 1.33 October 1, 2020 1.36 December 31, 2020 1.37 2020 average 1.35 If the current rate method is used to restate this subsidiary's financial statements from pound sterling to U.S. dollars, how much is the amount of translation gain or loss? Hints: 1. For the current rate method, what financial statement items are translated using the current rate? The net amount for those items has a beginning balance of 60,000 and an ending balance of 74,000. ii. Think about the trend of the foreign exchange rates: has pound sterling appreciated or depreciated? iii . If you want to use the "balancing" approach, click onto this link to open a spreadsheet on a new tab: Translation Worksheet in Excel. Do not submit your worksheet. iv. There are different versions for this exam. There is another similar question on the calculation of remeasurement gains/losses, but foreign exchange rates might be different from this one. Read the foreign exchange carefully!! A. $1,400 translation loss B. $4,630 translation loss C. $4,630 translation gain D. $1,400 translation gain