A US company with the US dollar as its functional currency is preparing to report consolidated financial statements for Year One. At the end of that year, because of a foreign subsidiary, the company has a translation adjustment account with an $18,000 credit balance. In addition, the US company had a receivable for 100,000 lira from a customer in Italy. This receivable was worth $11,000 when it was established on November 9. However, the currency exchange rates changed, and it was worth $14,000 when paid by the customer on January 30 of Year Two. The 100,000 lira receivable was worth $13,000 on December 31, Year One. What gain appears in this company's consolidated income statement for Year One?
A US company with the US dollar as its functional currency is preparing to report consolidated financial statements for Year One. At the end of that year, because of a foreign subsidiary, the company has a translation adjustment account with an $18,000 credit balance. In addition, the US company had a receivable for 100,000 lira from a customer in Italy. This receivable was worth $11,000 when it was established on November 9. However, the currency exchange rates changed, and it was worth $14,000 when paid by the customer on January 30 of Year Two. The 100,000 lira receivable was worth $13,000 on December 31, Year One. What gain appears in this company's consolidated income statement for Year One?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:A US company with the US dollar as its functional currency is preparing to report consolidated financial statements for
Year One. At the end of that year, because of a foreign subsidiary, the company has a translation adjustment account with
an $18,000 credit balance. In addition, the US company had a receivable for 100,000 lira from a customer in Italy. This
receivable was worth $11,000 when it was established on November 9. However, the currency exchange rates changed,
and it was worth $14,000 when paid by the customer on January 30 of Year Two. The 100,000 lira receivable was worth
$13,000 on December 31, Year One. What gain appears in this company's consolidated income statement for Year One?
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