Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local

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 2016, the subsidiary had the following balance sheet (amounts are in thousands (000's)) Cash Inventory Land Building Accumulated depreciation NGN 20, 080 20,080 10,040 NGN 15,560 Notes payable 10,400 Common stock 4,040 Retained earnings 40,400 (20,200) 2 400Reton NGN 50,200 NGN 50,200 The subsidiary acquired the inventory on August 1, 2016, and the land and building in 2010. It issued the common stock in 2008 During 2017, the following transactions took place 2017 Feb. 1 May 1 June 1 Aug. 1 Sept.1 oct. 1 Nov. 1 Dec. Dec. 31 Paid 8,040,000 NGN on the note payable Sold entire inventory for 16,400,000 NGN on account. Sold land for 6,040,000 NGN cash Collected al1 accounts receivable Signed long-term note to receive 8,040,000 NGN cash Bought inventory for 20,040,000 NGN cash. Bought land for 3,040,000 NGN on account. Declared and paid 3,040,000 NGN cash dividend to parent. Recorded depreciation for the entire year of 2,020,000 NGN

Explanation / Answer

Amounts 000's a Translation—only changes in net assets have an impact on the computation of the translation adjustment. Net asset balance 1/1 NGN     30,120 x $ 0.0068 =         205 Increases in net assets (income): Sold inventory at a profit 5/1        6,000 x $ 0.0072 =           43 Sold land at a gain 6/1        2,000 x $ 0.0074 =           15 Decreases in net assets: Paid a dividend 12/1     (3,040) x $ 0.0086 =         (26) Depreciation recorded     (2,020) x $ 0.0082 =         (17) Net asset balance 12/31 NGN     33,060         220 Net asset balance 12/31 at current exchange rate NGN     31,000 x $ 0.0092 =       (285) Translation adjustment—positive         (65) b Remeasurement—only changes in net monetary assets and liabilities have an impact on the computation of the remeasurement gain. Beginning net monetary liability position NGN     (4,520) x $ 0.0068 =         (31) Increases in monetary assets: Sold inventory 5/1                 16,400 x $ 0.0072 =         118 Sold land 6/1        6,040 x $ 0.0074 =           45 Decreases in monetary assets: Bought inventory 10/1 (20,040) x $ 0.0082 =       (164) Bought land 11/1     (3,040) x $ 0.0084 =         (26) Paid a dividend 12/1     (3,040) x $ 0.0086 =         (26) Ending net monetary liability position NGN     (8,200)         (84) Ending net monetary liability position at current exchange rate NGN     (8,200) x $ 0.0092 =         (75) Remeasurement gain           (9) Note: The purchase of land on account did not result in a decrease in monetary assets, rather an increase in monetary liabilities. Payment on the note payable and collection of accounts receivable do not affect the net monetary liability position.

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.