Question
The 2021 beginning and ending trial balances of a German subsidiary of a U.S. company appear below, in euros. 1-Jan 31-Dec Dr(Cr) Dr (Cr) Cash
The 2021 beginning and ending trial balances of a German subsidiary of a U.S. company appear below, in euros.
1-Jan | 31-Dec | |
Dr(Cr) | Dr (Cr) | |
Cash and receivables | 37,200 | 46,500 |
Inventories at cost | 93,000 | 102,300 |
Investments, at market | 69,750 | 88,350 |
Plant and equipment, net | 465,000 | 520,800 |
Intangibles, net | 23,250 | 25,110 |
Accounts Payable | (139,500) | (176,700) |
Unearned Revenue | (74,400) | (60,450) |
Notes Payable | (186,000) | (209,250) |
Deferred Tax Liabilities | (65,100) | (76,260) |
Capital stock | (46,500) | (46,500) |
Retained earnings, January 1 | (176,700) | (176,700) |
Dividends | 55,800 | |
Sales | (1,302,000) | |
Cost of goods sold | 883,500 | |
Operating expenses | _______ | 325,500 |
Total | 0 | 0 |
Exchange rates ($/) are:
January 1, 2021 $1.13
Average for 2021 1.17
December 31, 2021 1.19
Additional information:
1. Dividends were declared on November 1, 2021, when the exchange rate was $1.165.
2. Sales, inventory purchases, and out-of-pocket operating expenses were incurred evenly during the year.
3. Plant and equipment on hand at the beginning of the year was purchased when the exchange rate was $1.14/. Equipment of 80,000 was acquired during 2021, when the exchange rate was $1.155.
4. Depreciation of 20,000 is included in operating expenses. Of that amount, 4,000 relates to plant and equipment acquired during 2021.
Required:
a. Assume the subsidiarys functional currency is the U.S. dollar. Compute the remeasurement gain or loss for 2021. Also, prepare a schedule to show how remeasuremnent gain/loss is calculated.
Dr (Cr) | Rate | U.S. $ | |
Cash and receivables | 46,500 | ||
Inventories at cost | 102,300 | ||
Investments, at market | 88,350 | ||
Plant and equipment, net | 520,800 | ||
Intangibles, net | 25,110 | ||
Accounts Payable | (176,700) | ||
Unearned Revenue | (60,450) | ||
Notes Payable | (209,250) | ||
Deferred Tax Liabilities | (76,260) | ||
Capital stock | (46,500) | ||
Retained earnings, January 1 | (176,700) | ||
Dividends | 55,800 | ||
Sales | (1,302,000) | ||
Cost of goods sold | 883,500 | ||
Operating expenses | 325,500 | ||
Remeasurement (gain)/loss | |||
Total | 0 |
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