Question
Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2019, the subsidiary
Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2019, the subsidiary had the following balance sheet (amounts are in thousands [000s]): Cash NGN 16,420 Notes payable NGN 20,240 Inventory 11,200 Common stock 21,400 Land 4,120 Retained earnings 10,700 Building 41,200 Accumulated depreciation (20,600 ) NGN 52,340 NGN 52,340 The subsidiary acquired the inventory on August 1, 2019, and the land and building in 2013. It issued the common stock in 2011. During 2020, the following transactions took place: 2020 Feb. 1 Paid 8,120,000 NGN on the note payable. May 1 Sold entire inventory for 17,200,000 NGN on account. June 1 Sold land for 6,120,000 NGN cash. Aug. 1 Collected all accounts receivable. Sept. 1 Signed long-term note to receive 8,120,000 NGN cash. Oct. 1 Bought inventory for 20,120,000 NGN cash. Nov. 1 Bought land for 3,120,000 NGN on account. Dec. 1 Declared and paid 3,120,000 NGN cash dividend to parent. Dec. 31 Recorded depreciation for the entire year of 2,060,000 NGN. The U.S dollar ($) exchange rates for 1 NGN are as follows: 2011 NGN 1 = $ 0.0060 2013 1 = 0.0054 August 1, 2019 1 = 0.0074 December 31, 2019 1 = 0.0076 February 1, 2020 1 = 0.0078 May 1, 2020 1 = 0.0080 June 1, 2020 1 = 0.0082 August 1, 2020 1 = 0.0086 September 1, 2020 1 = 0.0088 October 1, 2020 1 = 0.0090 November 1, 2020 1 = 0.0092 December 1, 2020 1 = 0.0094 December 31, 2020 1 = 0.0108 Average for 2020 1 = 0.0098 Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2020? Assuming the U.S.$ is the subsidiary's functional currency, what is the remeasurement gain or loss determined solely for 2020? a. Positive translation adjustment ______ b. Remeasurement gain ______
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