Question

Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2017 with three assets: cash of 28,200 dinars, accounts receivable of 82,000 dinars, and land that cost 220,000 dinars when acquired on April 1, 2016. On January 1, 2017, Zugar has a 170,000 dinar note payable, and no other liabilities. On May 1, 2017, Zugar renders services to a customer for 140,000 dinars, which was immediately paid in cash. On June 1, 2017, Zugar incurred a 120,000 dinar operating expense, which was immediately paid in cash. No other transactions occurred during the year. Currency exchange rates for 1 dinar follow:

April 1, 2016 $0.53 = 1 dinar
January 1, 2017 0.56 = 1
May 1, 2017 0.57 = 1
June 1, 2017 0.59 = 1
December 31, 2017 0.61 = 1
Assume that Zugar is a foreign subsidiary of a U.S. multinational company that uses the U.S. dollar as its reporting currency. Assume also that the dinar is the subsidiary’s functional currency. What is the translation adjustment for this subsidiary for the year 2017?

Assume that Zugar is a foreign subsidiary of a U.S. multinational company that uses the U.S. dollar as its reporting currency. Assume also that the U.S. dollar is the subsidiary’s functional currency. What is the remeasurement gain or loss for 2017?

Assume that Zugar is a foreign subsidiary of a U.S. multinational company. On the December 31, 2017, balance sheet, what is the translated value of the Land account? On the December 31, 2017, balance sheet, what is the remeasured value of the Land account?

(Input all amounts as positive.)

Answer 1

Accounts Amount (in Dinar)

Cash_________________28,000

Accounts Receivable_____82,000

Land________________220,000

Total Assets__________330.000

Less: Notes Payable___(170,000)

Net Assets___________160,000





The translation adjustment for this subsidiary for the year 2017?

Particulars Amount in Dinar Translation Rate Amount in Dollar

Net assets, 1/1_______160,000__________0.50_______80,000

Add: Rendered services_140,000________0.57________79,000

Less: Incurred expense _(120,000)________0.59_______(70,800)

Net assets, 12/31_______180.000___________________88,200

Net assets, 12/31 at current__180,000______0.61_______109.800

Translation adjustment (positive) ____________________(21,600)



What is the remeasurement gain or loss for 2017

Particulars Amount in Dinar Translation Rate Amount in Dollar

Net Monetary Asset, 1/1 __28,000________0.56_______15,680.00

Add: Rendered services_140,000________0.57________79,000

Less: Incurred expense _(120,000)________0.59_______(70,800)

Add:Accounts Receivable_80,000________0.56______44,800

Less: Accounts Payable_(170,000)________0.56_____(95,200)

Net monetary assets, 12/31_(42,000)______________(26,540.00)

Net monetary assets, 12/31 at current exchange rate

(42,000)_________0.61____(25,620)

Remeasurement gain - - 920.00





Translated value of land is $134,200 ( derived from 220,000 dinar x 0.61)

Remeasured value of land is $116,600 (derived from 220,000 dinar x 0.53)

Step-by-step explanation:

Accounts Amount (in Dinar)

Cash_________________28,000

Accounts Receivable_____82,000

Land________________220,000

Total Assets__________330.000

Less: Notes Payable___(170,000)

Net Assets___________160,000





The translation adjustment for this subsidiary for the year 2017?

Particulars Amount in Dinar Translation Rate Amount in Dollar

Net assets, 1/1_______160,000__________0.50_______80,000

Add: Rendered services_140,000________0.57________79,000

Less: Incurred expense _(120,000)________0.59_______(70,800)

Net assets, 12/31_______180.000___________________88,200

Net assets, 12/31 at current__180,000______0.61_______109.800

Translation adjustment (positive) ____________________(21,600)



What is the remeasurement gain or loss for 2017

Particulars Amount in Dinar Translation Rate Amount in Dollar

Net Monetary Asset, 1/1 __28,000________0.56_______15,680.00

Add: Rendered services_140,000________0.57________79,000

Less: Incurred expense _(120,000)________0.59_______(70,800)

Add:Accounts Receivable_80,000________0.56______44,800

Less: Accounts Payable_(170,000)________0.56_____(95,200)

Net monetary assets, 12/31_(42,000)______________(26,540.00)

Net monetary assets, 12/31 at current exchange rate

(42,000)_________0.61____(25,620)

Remeasurement gain - - 920.00





Translated value of land is $134,200 ( derived from 220,000 dinar x 0.61)

Remeasured value of land is $116,600 (derived from 220,000 dinar x 0.53)