Translation and Remeasurement Gains and Losses
Amcrest France Sarl, located in Paris, France, is a financial subsidiary of Target Corporation, a U.S. company. Amcrests accounts are reported in euros. Assume that the following data relate to Amcrests activities for 2020 (in millions).
Net monetary liabilities, beginning of year (15,000) Net assets, beginning of year 5,400 Transactions during 2020: Sales 72,000 Inventory purchases 59,000 Depreciation and amortization 1,000 Cost of sales 61,000 Cash operating expenses 9,500 Dividends declared and paid 100 New long-term interest borrowings 300 Sales, inventory purchases, and cash operating expenses were reported evenly throughout the year. Exchange rates are as follows ($/) $1.30 Beginning of 2020 | Average for 2020 1.24 End of 2020 1.20 Rate when assets related to depreciation and amortization were acquired 1.45 Rate when dividends declared 1.21 Rate when long-term interest borrowings occurred 1.25 Required a. Prepare a schedule to compute Amcrest's 2020 remeasurement gain or loss, assuming Amcrest's functional currency is the U.S. dollar. Instructions: 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 in millions. (in millions) $/ $ 2020 beginning exposed position 1.3 $ (15,000) (19,500) Sales 1.24 72,000 89,280 (59,000) Purchases 1.24 (73,160) Cash operating expenses (11,780) (9,500) 1.24 |(100) Dividends 1.21 (121) (15,281) |(11,600) 2020 ending exposed position 1.2 (13,920) Remeasurement gain * $ 1,361 b. Prepare a schedule to compute Amcrest's 2020 translation gain or loss, assuming Amcrest's functional currency is the euro. Instructions: 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 translation gain or translation loss answer. 5. Enter answers in millions. (in millions) $/ $ 2020 beginning exposed position 1.3 $ 5,400 7,020 0 X Net income 1.24 Dividends (100) 1.21 (121) 0 X 2020 ending exposed position 0 X 1.2 0 xX $ Translation loss Net monetary liabilities, beginning of year (15,000) Net assets, beginning of year 5,400 Transactions during 2020: Sales 72,000 Inventory purchases 59,000 Depreciation and amortization 1,000 Cost of sales 61,000 Cash operating expenses 9,500 Dividends declared and paid 100 New long-term interest borrowings 300 Sales, inventory purchases, and cash operating expenses were reported evenly throughout the year. Exchange rates are as follows ($/) $1.30 Beginning of 2020 | Average for 2020 1.24 End of 2020 1.20 Rate when assets related to depreciation and amortization were acquired 1.45 Rate when dividends declared 1.21 Rate when long-term interest borrowings occurred 1.25 Required a. Prepare a schedule to compute Amcrest's 2020 remeasurement gain or loss, assuming Amcrest's functional currency is the U.S. dollar. Instructions: 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 in millions. (in millions) $/ $ 2020 beginning exposed position 1.3 $ (15,000) (19,500) Sales 1.24 72,000 89,280 (59,000) Purchases 1.24 (73,160) Cash operating expenses (11,780) (9,500) 1.24 |(100) Dividends 1.21 (121) (15,281) |(11,600) 2020 ending exposed position 1.2 (13,920) Remeasurement gain * $ 1,361 b. Prepare a schedule to compute Amcrest's 2020 translation gain or loss, assuming Amcrest's functional currency is the euro. Instructions: 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 translation gain or translation loss answer. 5. Enter answers in millions. (in millions) $/ $ 2020 beginning exposed position 1.3 $ 5,400 7,020 0 X Net income 1.24 Dividends (100) 1.21 (121) 0 X 2020 ending exposed position 0 X 1.2 0 xX $ Translation loss
