Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2019, the subsidiary had the following balance sheet (amounts are in thousands [000s]): Cash NGN 16,240 Notes payable NGN 20,180 Inventory 10,900 Common stock 21,000 Land 4,090 Retained earnings 10,500 Building 40,900 Accumulated depreciation (20,450 ) NGN 51,680 NGN 51,680 The subsidiary acquired the inventory on August 1, 2019, and the land and building in 2013. It issued the common stock in 2011. During 2020, the following transactions took place: 2020 Feb. 1 Paid 8,090,000 NGN on the note payable. May 1 Sold entire inventory for 16,900,000 NGN on account. June 1 Sold land for 6,090,000 NGN cash. Aug. 1 Collected all accounts receivable. Sept. 1 Signed long-term note to receive 8,090,000 NGN cash. Oct. 1 Bought inventory for 20,090,000 NGN cash. Nov. 1 Bought land for 3,090,000 NGN on account. Dec. 1 Declared and paid 3,090,000 NGN cash dividend to parent. Dec. 31 Recorded depreciation for the entire year of 2,045,000 NGN. The U.S dollar ($) exchange rates for 1 NGN are as follows: 2011 NGN 1 = $ 0.0057 2013 1 = 0.0051 August 1, 2019 1 = 0.0071 December 31, 2019 1 = 0.0073 February 1, 2020 1 = 0.0075 May 1, 2020 1 = 0.0077 June 1, 2020 1 = 0.0079 August 1, 2020 1 = 0.0083 September 1, 2020 1 = 0.0085 October 1, 2020 1 = 0.0087 November 1, 2020 1 = 0.0089 December 1, 2020 1 = 0.0091 December 31, 2020 1 = 0.0102 Average for 2020 1 = 0.0092 Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2020? Assuming the U.S.$ is the subsidiary's functional currency, what is the remeasurement gain or loss determined solely for 2020?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2019, the subsidiary had the following balance sheet (amounts are in thousands [000s]):


Cash	NGN	16,240		Notes payable	NGN	20,180
Inventory		10,900		Common stock		21,000
Land		4,090		Retained earnings		10,500
Building		40,900
Accumulated depreciation		(20,450	)
	NGN	51,680			NGN	51,680

The subsidiary acquired the inventory on August 1, 2019, and the land and building in 2013. It issued the common stock in 2011. During 2020, the following transactions took place:

2020
Feb.	1	Paid 8,090,000 NGN on the note payable.
May	1	Sold entire inventory for 16,900,000 NGN on account.
June	1	Sold land for 6,090,000 NGN cash.
Aug.	1	Collected all accounts receivable.
Sept.	1	Signed long-term note to receive 8,090,000 NGN cash.
Oct.	1	Bought inventory for 20,090,000 NGN cash.
Nov.	1	Bought land for 3,090,000 NGN on account.
Dec.	1	Declared and paid 3,090,000 NGN cash dividend to parent.
Dec.	31	Recorded depreciation for the entire year of 2,045,000 NGN.

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


2011	NGN 1	=	$	0.0057
2013	1	=		0.0051
August 1, 2019	1	=		0.0071
December 31, 2019	1	=		0.0073
February 1, 2020	1	=		0.0075
May 1, 2020	1	=		0.0077
June 1, 2020	1	=		0.0079
August 1, 2020	1	=		0.0083
September 1, 2020	1	=		0.0085
October 1, 2020	1	=		0.0087
November 1, 2020	1	=		0.0089
December 1, 2020	1	=		0.0091
December 31, 2020	1	=		0.0102
Average for 2020	1	=		0.0092

Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2020?
Assuming the U.S.$ is the subsidiary's functional currency, what is the remeasurement gain or loss determined solely for 2020?

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