In 20X2, Canterra Company invested $2,600,000 CDN (800,000FC) to establish a foreign subsidiary, Forterra Ltd. Forterra took out a $320,000FC bank loan to help finance the purchase of equipment and furniture. At the time the loan was taken out, the exchange rate was 1FC = $3.40 CDN. The loan principal is not required to be repaid for five years. Forterra purchased equipment costing 960,000FC when the exchange was 1FC = $3.30 CDN. Forterra had a very successful first year of operations and decided to purchase a tract of land for 320,000FC. The exchange rate at the time of purchase was 1FC = $2.90 CDN. Forterra's policy is to declare and pay dividends at its year-end. Both Canterra and Forterra have December 31 year-ends. Forterra has provided the following information: Requested a. Calculate Forterra's cumulative translation gain/loss for 20X3 using the presentation currency method
In 20X2, Canterra Company invested $2,600,000 CDN (800,000FC) to establish a foreign subsidiary, Forterra Ltd. Forterra took out a $320,000FC bank loan to help finance the purchase of equipment and furniture. At the time the loan was taken out, the exchange rate was 1FC = $3.40 CDN. The loan principal is not required to be repaid for five years. Forterra purchased equipment costing 960,000FC when the exchange was 1FC = $3.30 CDN. Forterra had a very successful first year of operations and decided to purchase a tract of land for 320,000FC. The exchange rate at the time of purchase was 1FC = $2.90 CDN. Forterra's policy is to declare and pay dividends at its year-end. Both Canterra and Forterra have December 31 year-ends. Forterra has provided the following information: Requested a. Calculate Forterra's cumulative translation gain/loss for 20X3 using the presentation currency method
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
In 20X2, Canterra Company invested $2,600,000 CDN (800,000FC) to establish a foreign subsidiary, Forterra Ltd. Forterra took out a $320,000FC bank loan to help finance the purchase of equipment and furniture. At the time the loan was taken out, the exchange rate
was 1FC = $3.40 CDN. The loan principal is not required to be repaid for five years. Forterra purchased equipment costing 960,000FC
when the exchange was 1FC = $3.30 CDN.
Forterra had a very successful first year of operations and decided to purchase a tract of land for 320,000FC. The exchange rate at the
time of purchase was 1FC = $2.90 CDN. Forterra's policy is to declare and pay dividends at its year-end. Both Canterra and Forterra
have December 31 year-ends.
Forterra has provided the following information:
Requested
a. Calculate Forterra's cumulative translation gain/loss for 20X3 using the presentation currency method.
Transcribed Image Text:Assets:
Cash
Accounts receivable
Land
Forterra Ltd.
Statement of Financial Position
as of December 31
(in FC)
Equipment and furniture
Accumulated depreciation
Total assets
Liabilities and shareholders' equity:
Liabilities:
Accounts payable (current)
Bank loan (long-term)
Total liabilities
Shareholders' equity:
Common shares
Retained earnings
Total shareholders' equity
Total liabilities and shareholders' equity
20X3
20X2
48,000
64,000
320,000
960,000
960,000
(192,000) (96,000)
1.200.000 1.168.000
800,000
64.000
256,000
48,000
16,000
32,000
320,000 320,000
336,000
352,000
800,000
16,000
864,000 816,000
1.200.000 1.168.000
Transcribed Image Text:Exchange rates
20X2 average 1FC= $3.20 CDN
1FC= $3.00 CDN
1FC=$2.70 CDN
1FC= $2.50 CDN
20X2 year-end
20X3 average
20X3 year-end
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for the above question can you answer part b of it too:
b. Calculate Forterra's cumulative translation gain/loss for 20X3 using the functional currency method.
can you provide step by step solution explaining how each number is calculated. Thanks
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