Question
Watson Company has a subsidiary in the country of Alonza where the local currency unit is the kamel (KM). On December 31, 2014, the subsidiary
Watson Company has a subsidiary in the country of Alonza where the local currency unit is the kamel (KM). On December 31, 2014, the subsidiary has the following balance sheet: |
Cash | KM | 3,500 | Notes payable (due 2016) | KM | 22,000 |
Inventory | 15,500 | Common stock | 25,000 | ||
Land | 8,000 | Retained earnings | 12,500 | ||
Building | 65,000 | ||||
Accumulated depreciation | (32,500) | ||||
KM | 59,500 | KM | 59,500 | ||
The subsidiary acquired the inventory on August 1, 2014, and the land and buildings in 2000. It issued the common stock in 1998. During 2015, the following transactions took place: |
2015 | |
Feb. 1 | Paid 10,500 KM on the note payable. |
May 1 | Sold entire inventory for 24,000 KM on account. |
June 1 | Sold land for 8,900 KM cash. |
Aug. 1 | Collected all accounts receivable. |
Sept.1 | Signed long-term note to receive 11,500 KM cash. |
Oct. 1 | Bought inventory for 13,500 KM cash. |
Nov. 1 | Bought land for 8,000 KM on account. |
Dec. 1 | Declared and paid 4,000 KM cash dividend to parent. |
Dec. 31 | Recorded depreciation for the entire year of 3,250 KM. |
The exchange rates for 1 KM are as follows: |
1998 | 1 KM | = | $ | 0.30 |
2000 | 1 | = | 0.27 | |
August 1, 2014 | 1 | = | 0.37 | |
December 31, 2014 | 1 | = | 0.38 | |
February 1, 2015 | 1 | = | 0.39 | |
May 1, 2015 | 1 | = | 0.40 | |
June 1, 2015 | 1 | = | 0.41 | |
August 1, 2015 | 1 | = | 0.43 | |
September 1, 2015 | 1 | = | 0.44 | |
October 1, 2015 | 1 | = | 0.45 | |
November 1, 2015 | 1 | = | 0.46 | |
December 1, 2015 | 1 | = | 0.47 | |
December 31, 2015 | 1 | = | 0.42 | |
Average for 2015 | 1 | = | 0.40 | |
a. | If this is a translation, what is the translation adjustment determined solely for 2015? |
b. | If this is a remeasurement, what is the remeasurement gain or loss determined solely for 2015? |
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