Question

Mentor Co., a U.S. corporation, owned 100% of a Swiss corporation. The Swiss franc is the functional currency. The remeasurement of Mentor’s financial statements resulted in a $25,000 gain at year end. The translation of the financial statements resulted in a $40,000 gain at year end. What amount should Mentor recognize as foreign currency gain in its income statement?

Answer 1

$25,000

Step-by-step explanation:

Re-measurement of financial statement can be described as a techniques used to revalue or reestablish the value of foreign currency or value of a tangible asset appearing on the financial statements of a corporation in order to give financial record of its value that is more accurate.

Financial statement translation can be described as a corporate accounting process where the financial statement of a foreign subsidiary is converted into its reporting currency by the parent company where the consolidated financial statements is being prepared.

In accounting, gains from financial statement re-measurement should be recognized as foreign currency gain the income statement.

Therefore, Mentor should recognize $25,000 as foreign currency gain in its income statement.