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 | 17,000 | Notes payable (due 2016) | KM | 26,000 |
Inventory | 19,500 | Common stock | 28,000 | ||
Land | 9,000 | Retained earnings | 14,000 | ||
Building | 45,000 | ||||
Accumulated depreciation | (22,500) | ||||
KM | 68,000 | KM | 68,000 | ||
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 14,500 KM on the note payable. |
May 1 | Sold entire inventory for 25,000 KM on account. |
June 1 | Sold land for 10,400 KM cash. |
Aug. 1 | Collected all accounts receivable. |
Sept.1 | Signed long-term note to receive 9,000 KM cash. |
Oct. 1 | Bought inventory for 14,500 KM cash. |
Nov. 1 | Bought land for 9,000 KM on account. |
Dec. 1 | Declared and paid 3,400 KM cash dividend to parent. |
Dec. 31 | Recorded depreciation for the entire year of 2,250 KM. |
The exchange rates for 1 KM are as follows: |
1998 | 1 KM | = | $ | 0.26 |
2000 | 1 | = | 0.24 | |
August 1, 2014 | 1 | = | 0.34 | |
December 31, 2014 | 1 | = | 0.36 | |
February 1, 2015 | 1 | = | 0.38 | |
May 1, 2015 | 1 | = | 0.40 | |
June 1, 2015 | 1 | = | 0.42 | |
August 1, 2015 | 1 | = | 0.44 | |
September 1, 2015 | 1 | = | 0.46 | |
October 1, 2015 | 1 | = | 0.48 | |
November 1, 2015 | 1 | = | 0.50 | |
December 1, 2015 | 1 | = | 0.52 | |
December 31, 2015 | 1 | = | 0.56 | |
Average for 2015 | 1 | = | 0.46 | |
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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