Determine the amount of translation adjustment, Financial Accounting

Alliance Corporation (an Australian company) invests 1,000,000 marks in a foreign subsidiary on January 1, Year 1. The subsidiary commences operations on that date, and generates net income of 200,000 marks during its first year of operations. No dividends are sent to the parent this year. A relevant exchange rate between Alliance’s reporting currency (A$) and the mark is as follows:

January 1, Year 1………….. A$0.15

Average, Year 1………………….0.17

December 31, 1997……………0.21

Required:

Determine the amount of translation adjustment that Alliance will report on its December 31, Year 1, balance sheet.

          Exchange   
        Marks Rate A$
Net Assets, 1/1/Y1      1,000,000           0.15    150,000
Increase in Net assets:        
    Net Income, Year 1        200,000           0.17      34,000
Net Assets, 31/12/Y1    1,200,000      184,000
             
Net Assets, 31/12/Y1 at        
the current exchange rate    1,200,000           0.21    252,000
Translation adjustment           -68,000
             

 

Posted Date: 8/9/2012 8:18:44 AM | Location : United States







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