Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local

Question

Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2016, the subsidiary had the following balance sheet (amounts are in thousands (000's)):

The subsidiary acquired the inventory on August 1, 2016, and the land and building in 2010. It issued the common stock in 2008. During 2017, the following transactions took place:

The U.S dollar ($) exchange rates for 1 NGN are as follows:

Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2017?

Assuming the U.S.$ is the subsidiary's functional currency, what is the remeasurement gain or loss determined solely for 2017?

a.Positivetranslation adjustment: ?

b.Remeasurement gain: ?

Cash NGN 16,820 Notes payable NGN 20,440 Inventory 12,200 Common stock 22,600 Land 4,220 Retained earnings 11,300 Building 42,200 Accumulated depreciation (21,100 ) NGN 54,340 NGN 54,340

Explanation / Answer

a)

b)

Particulars Amount (NGN) Rate per NGN Amount ($) Net asset Balance, 1/1 33900000 $0.0086 291540 Increases in net assets :- Sold inventory at a Profit, 1/5 6000000 $0.0090 54000 Sold land at a gain, 1/6 2000000 $0.0092 18400 Decreases in net assets :- Paid a dividend, 1/12 (3220000) $0.0104 (33488) Depreciation Recorded (2110000) $0.0118 (24898) Net Assets Balance, 31/12 36570000 305554 Net Assets Balance, 31/12 at current exchange rate 36570000 $0.0128 468096 Translation adjustment - Positive (162542)

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