Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria, where the local currency unit is the naira (NGN). On December 31, 2023, the subsidiary had the following balance sheet (amounts are in thousands [000s]): Cash NGN 16,000 Notes payable NGN 20,000 Inventory 10,000 Common stock 20,000 Land 4,000 Retained earnings 10,000 Building 40,000 Accumulated depreciation (20,000) NGN 50,000 NGN 50,000 The subsidiary issued the common stock in 2015, and acquired the land and building in 2016. It acquired the inventory on August 1, 2023. During 2024, the following transactions took place: 2024 February 1 Paid 8,000,000 NGN on the note payable. May 1 Sold entire inventory for 16,000,000 NGN on account. June 1 Sold land for 6,000,000 NGN cash. August 1 Collected all accounts receivable. September 1 Signed long-term note to receive 8,000,000 NGN cash. October 1 Bought inventory for 20,000,000 NGN cash. November 1 Bought land for 3,000,000 NGN on account. December 1 Declared and paid 3,000,000 NGN cash dividend to parent. December 31 Recorded depreciation for the entire year of 2,000,000 NGN. The U.S dollar ($) exchange rates for 1 NGN are as follows: 2015 NGN 1 = $ 0.0048 2016 NGN 1 = 0.0042 August 1, 2023 NGN 1 = 0.0062 December 31, 2023 NGN 1 = 0.0064 February 1, 2024 NGN 1 = 0.0066 May 1, 2024 NGN 1 = 0.0068 June 1, 2024 NGN 1 = 0.0070 August 1, 2024 NGN 1 = 0.0074 September 1, 2024 NGN 1 = 0.0076 October 1, 2024 NGN 1 = 0.0078 November 1, 2024 NGN 1 = 0.0080 December 1, 2024 NGN 1 = 0.0082 December 31, 2024 NGN 1 = 0.0084 Average for 2024 NGN 1 = 0.0074 Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2024? Assuming the U.S. dollar is the subsidiary's functional currency, what is the remeasurement gain or loss determined solely for 2024? Note: Input all amounts as positive. Enter amounts in whole dollars.
Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria, where the local currency unit is the naira (NGN). On December 31, 2023, the subsidiary had the following balance sheet (amounts are in thousands [000s]): Cash NGN 16,000 Notes payable NGN 20,000 Inventory 10,000 Common stock 20,000 Land 4,000 Retained earnings 10,000 Building 40,000 Accumulated depreciation (20,000) NGN 50,000 NGN 50,000 The subsidiary issued the common stock in 2015, and acquired the land and building in 2016. It acquired the inventory on August 1, 2023. During 2024, the following transactions took place: 2024 February 1 Paid 8,000,000 NGN on the note payable. May 1 Sold entire inventory for 16,000,000 NGN on account. June 1 Sold land for 6,000,000 NGN cash. August 1 Collected all accounts receivable. September 1 Signed long-term note to receive 8,000,000 NGN cash. October 1 Bought inventory for 20,000,000 NGN cash. November 1 Bought land for 3,000,000 NGN on account. December 1 Declared and paid 3,000,000 NGN cash dividend to parent. December 31 Recorded depreciation for the entire year of 2,000,000 NGN. The U.S dollar ($) exchange rates for 1 NGN are as follows: 2015 NGN 1 = $ 0.0048 2016 NGN 1 = 0.0042 August 1, 2023 NGN 1 = 0.0062 December 31, 2023 NGN 1 = 0.0064 February 1, 2024 NGN 1 = 0.0066 May 1, 2024 NGN 1 = 0.0068 June 1, 2024 NGN 1 = 0.0070 August 1, 2024 NGN 1 = 0.0074 September 1, 2024 NGN 1 = 0.0076 October 1, 2024 NGN 1 = 0.0078 November 1, 2024 NGN 1 = 0.0080 December 1, 2024 NGN 1 = 0.0082 December 31, 2024 NGN 1 = 0.0084 Average for 2024 NGN 1 = 0.0074 Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2024? Assuming the U.S. dollar is the subsidiary's functional currency, what is the remeasurement gain or loss determined solely for 2024? Note: Input all amounts as positive. Enter amounts in whole dollars.
Chapter10: Measuring Exposure To Exchange Rate Fluctuations
Section: Chapter Questions
Problem 1IEE
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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, 2023, the subsidiary had the following balance sheet (amounts are in thousands [000s]):
| Cash | NGN 16,000 | Notes payable | NGN 20,000 |
| Inventory | 10,000 | Common stock | 20,000 |
| Land | 4,000 | Retained earnings | 10,000 |
| Building | 40,000 | ||
| Accumulated depreciation | (20,000) | ||
| NGN 50,000 | NGN 50,000 |
The subsidiary issued the common stock in 2015, and acquired the land and building in 2016. It acquired the inventory on August 1, 2023. During 2024, the following transactions took place:
| 2024 | |
|---|---|
| February 1 | Paid 8,000,000 NGN on the note payable. |
| May 1 | Sold entire inventory for 16,000,000 NGN on account. |
| June 1 | Sold land for 6,000,000 NGN cash. |
| August 1 | Collected all accounts receivable. |
| September 1 | Signed long-term note to receive 8,000,000 NGN cash. |
| October 1 | Bought inventory for 20,000,000 NGN cash. |
| November 1 | Bought land for 3,000,000 NGN on account. |
| December 1 | Declared and paid 3,000,000 NGN cash dividend to parent. |
| December 31 | Recorded depreciation for the entire year of 2,000,000 NGN. |
The U.S dollar ($) exchange rates for 1 NGN are as follows:
| 2015 | NGN 1 = $ 0.0048 |
|---|---|
| 2016 | NGN 1 = 0.0042 |
| August 1, 2023 | NGN 1 = 0.0062 |
| December 31, 2023 | NGN 1 = 0.0064 |
| February 1, 2024 | NGN 1 = 0.0066 |
| May 1, 2024 | NGN 1 = 0.0068 |
| June 1, 2024 | NGN 1 = 0.0070 |
| August 1, 2024 | NGN 1 = 0.0074 |
| September 1, 2024 | NGN 1 = 0.0076 |
| October 1, 2024 | NGN 1 = 0.0078 |
| November 1, 2024 | NGN 1 = 0.0080 |
| December 1, 2024 | NGN 1 = 0.0082 |
| December 31, 2024 | NGN 1 = 0.0084 |
| Average for 2024 | NGN 1 = 0.0074 |
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Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2024?
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Assuming the U.S. dollar is the subsidiary's functional currency, what is the remeasurement gain or loss determined solely for 2024?
Note: Input all amounts as positive. Enter amounts in whole dollars.
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