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The Thode Company established a wholly-owned subsidiary in Saudi Arabia on January 1, 2016, when the exchange rate was $0.30/riyal (SAR). Of Thodes initial SAR160,000,000

The Thode Company established a wholly-owned subsidiary in Saudi Arabia on January 1, 2016, when the exchange rate was $0.30/riyal (SAR). Of Thodes initial SAR160,000,000 investment, SAR80,000,000 was used to acquire plant assets (ten-year life) and SAR40,000,000 was used to acquire inventory. The remaining amount was initially held as cash by the subsidiary.

During 2016, the subsidiary reported net income of SAR16,000,000. Inventory purchases of SAR12,000,000 were made evenly during the year. It paid dividends of SAR8,000,000 on September 30, when the exchange rate was $0.255/SAR. No other transactions occurred between the subsidiary and the parent. The subsidiary's condensed income statement appears below:

Sales SAR68,000,000
Cost of goods sold (32,000,000)*
Depreciation expense (8,000,000)**
Other cash expenses (12,000,000)
Net income SAR16,000,000

*Assume a FIFO inventory flow assumption. **Relates solely to plant assets acquired on January 1, 2016. The average rate during the year was $0.265/SAR. On the balance sheet date, it was $0.25/SAR.

(a) Assuming the functional currency is the riyal, translate the subsidiarys preclosing trial balance at December 31, 2016, and prepare a schedule calculating the subsidiarys translation gain or loss for 2016.

  • Use negative signs with your Cr (credit balance) answers, in the P Dr(Cr) and $ Dr(Cr) columns only.
  • Enter answers using all zeros (do not abbreviate answers to millions or thousands).

December 31, 2016

Translated Trial Balance

SAR Dr (Cr) $/SAR $ Dr (Cr)
Cash Answer Answer Answer
Inventory Answer Answer Answer
Plant assets Answer Answer Answer
Capital Answer Answer Answer
Dividends Answer Answer Answer
Sales Answer Answer Answer
Cost of goods sold Answer Answer Answer
Depreciation expense Answer Answer Answer
Other expenses Answer Answer Answer
Other comprehensive loss (translation gain or loss) below Answer
Net income Answer Answer

Instructions for Translation Gain/Loss Schedule:

  1. Use negative signs with answers to indicate a negative exposed position balance.
  2. Use negative signs with answers to indicate an amount that reduces the exposed position balance.
  3. Using the drop-down menu, select the appropriate answer to indicate a translation gain or translation loss.
  4. Do not use a negative sign with your translation gain or translation loss answer.
  5. Enter answers using all zeros (do not abbreviate to millions or thousands).

Translation Gain/Loss Schedule
SAR $/SAR $
Exposed position, beginning Answer Answer Answer
Net Income Answer Answer Answer
Dividends Answer Answer Answer
Answer
Exposed position, ending Answer Answer Answer
AnswerTranslation gainTranslation loss Answer

(b) Assuming the functional currency is the U.S. dollar, remeasure the subsidiarys preclosing trial balance at December 31, 2016, and prepare a schedule calculating the subsidiarys remeasurement gain or loss for 2016.

  • Use negative signs with your Cr (credit balance) answers, in the P Dr(Cr) and $ Dr(Cr) columns only.
  • Enter answers using all zeros (do not abbreviate answers to millions or thousands).

December 31, 2016

Remeasured Trial Balance

SAR Dr (Cr) $/SAR $ Dr (Cr)
Cash Answer Answer Answer
Inventory Answer Answer
Plant assets Answer Answer Answer
Capital Answer Answer Answer
Dividends Answer Answer Answer
Sales Answer Answer Answer
Cost of goods sold Answer Answer Answer
Depreciation expense Answer Answer Answer
Other expenses Answer Answer Answer
Remeasurement gain or loss below Answer
Answer Answer

Instructions for Remeasurement Gain/Loss Schedule:

  1. Use negative signs with answers to indicate a negative exposed position balance.
  2. Use negative signs with answers to indicate an amount that reduces the exposed position balance.
  3. Using the drop-down menu, select the appropriate answer to indicate a remeasurement gain or remeasurement loss.
  4. Do not use a negative sign with your remeasurement gain or remeasurement loss answer.
  5. Enter answers using all zeros (do not abbreviate to millions or thousands).

Remeasurement Gain/Loss Schedule
SAR $/SAR $
Exposed position, beginning Answer Answer Answer
Sales Answer Answer Answer
Purchases Answer Answer Answer
Cash expenses Answer Answer Answer
Dividends Answer Answer Answer
Answer
Exposed position, ending Answer Answer Answer
AnswerRemeasurment gainRemeasurement loss Answer

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