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 | 16,580 |
| Notes payable | NGN | 20,260 |
Inventory |
| 11,300 |
| Common stock |
| 21,600 |
Land |
| 4,130 |
| Retained earnings |
| 10,800 |
Building |
| 41,300 |
|
|
|
|
Accumulated depreciation |
| (20,650 | ) |
|
|
|
| NGN | 52,660 |
|
| NGN | 52,660 |
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 8,130,000 NGN on the note payable. |
May | 1 |
| Sold entire inventory for 17,300,000 NGN on account. |
June | 1 |
| Sold land for 6,130,000 NGN cash. |
Aug. | 1 |
| Collected all accounts receivable. |
Sept. | 1 |
| Signed long-term note to receive 8,130,000 NGN cash. |
Oct. | 1 |
| Bought inventory for 20,130,000 NGN cash. |
Nov. | 1 |
| Bought land for 3,130,000 NGN on account. |
Dec. | 1 |
| Declared and paid 3,130,000 NGN cash dividend to parent. |
Dec. | 31 |
| Recorded depreciation for the entire year of 2,065,000 NGN. |
The U.S dollar ($) exchange rates for 1 NGN are as follows:
| ||||
2011 | NGN 1 | = | $ | 0.0061 |
2013 | 1 | = |
| 0.0055 |
August 1, 2019 | 1 | = |
| 0.0075 |
December 31, 2019 | 1 | = |
| 0.0077 |
February 1, 2020 | 1 | = |
| 0.0079 |
May 1, 2020 | 1 | = |
| 0.0081 |
June 1, 2020 | 1 | = |
| 0.0083 |
August 1, 2020 | 1 | = |
| 0.0087 |
September 1, 2020 | 1 | = |
| 0.0089 |
October 1, 2020 | 1 | = |
| 0.0091 |
November 1, 2020 | 1 | = |
| 0.0093 |
December 1, 2020 | 1 | = |
| 0.0095 |
December 31, 2020 | 1 | = |
| 0.0110 |
Average for 2020 | 1 | = |
| 0.0100 |
- Assuming the NGN is the subsidiary's functional currency, what is the translation gain or loss for 2020?
- Assuming the U.S.$ is the subsidiary's functional currency, what is the translation gain or loss for 2020?
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