Panda Company, a U.S. multinational enterprise, has a subsidiary in Belgium. On April 1, 2016, Panda acquired for $550,000 a draft for 500,000 and remitted it to the Belgian subsidiary as a long-term, non-interest-bearing advance. The advance was to be repaid ultimately in U.S. dollars. The euro () is the functional currency of the subsidiary.

You were engaged as independent auditor for the audit of the March 31, 2017, consolidated financial statements of Panda Company and subsidiaries (including the Belgian subsidiary). On March 31, 2017, the selling spot rate for the euro was 1 = $ 1.05. Pandas controller translated the Payable to Panda Company liability in the Belgian subsidiarys balance sheet from 500,000 to $525,000 (500,000 x $1.05 = $525,000). Because the $525,000 translated balance of the subsidiarys Payable to Panda Company liability did not offset the $550,000 balance of Pandas Receivable from Belgian Subsidiary ledger account on March 31, 2017, Pandas controller prepared the following elimination (in journal entry format) on March 31, 2017:

Dr. Foreign Currency Translation Adjustments Belgian Subsidiary25,000

Cr. Receivable from Belgian Subsidiary Panda25,000

To record translation adjustment resulting from decline in exchange rate for the euro 1 = $1.05 on March 31, 2017, from 1 = $1.10 on April 1, 2016

Required

Evaluate the accounting treatment described above.