Problem $8-31($Algo$)($LO $8-3,8-5)$

Stilton Company $($a U$.$S$.-$based company$)$ has a subsidiary in Canada that began operations at the start of $2024$ with assets of $138,000$

Canadian dollars $($CAD$)$ and liabilities of CAD $66,000.$ During this initial year of operation, the subsidiary reported a profit of CAD

$32,000.$ It distributed two dividends, each for CAD $5,600$ with one dividend declared on March $1$ and the other on October $1.$

Applicable U$.$S$.$ dollar $($$$)$ exchange rates for $1$ Canadian dollar follow:

Required:

a$.$ Assume that the Canadian dollar is this subsidiary's functional currency. What translation adjustment would the company report for

the year $2024?$

b$.$ Assume that on October $1,2024,$ Stilton entered into a forward exchange contract to hedge the net investment in this subsidiary. On

that date, the company agreed to sell CAD $260,000$ in three months at a forward exchange rate of $$0\mathrm{.}71/$CAD $1.$ Prepare the journal

entries required by this forward contract.

c$.$ Compute the net translation adjustment the company will report in accumulated other comprehensive income for the year $2024$

under this second set of circumstances.

Complete this question by entering your answers in the tabs below.

Assume that the Canadian dollar is this subsidiary's functional currency. What translation adjustment would the company

report for the year $2024?$

Negative

translation adjustment