Red Hat, Inc. reported comprehensive income from 2008 to 2010 as follows ($ thou
ID: 2493461 • Letter: R
Question
Red Hat, Inc. reported comprehensive income from 2008 to 2010 as follows ($ thousands):
2008
2009
2010
Net income
$78,721
$87,253
$107,278
Unrealized loss on available-for-sale investments
(272)
(988)
(2,266)
Foreign currency translation
8,609
(8,283)
(309)
Comprehensive income
$87,058
$77,982
$104,403
Required:
Assuming that Red Hat has not purchased or sold any available-for-sale securities, what has happened to the value of the available-for-sale investments from 2008 to 2010? Is this change in value reported on the income statement?
Which method does Red Hat use to translate foreign subsidiaries? Why?
Explain the change in the translation adjustment from 2008 to 2010.
2008
2009
2010
Net income
$78,721
$87,253
$107,278
Unrealized loss on available-for-sale investments
(272)
(988)
(2,266)
Foreign currency translation
8,609
(8,283)
(309)
Comprehensive income
$87,058
$77,982
$104,403
Explanation / Answer
1)
value of the available-for-sale investments from 2008 to 2010 decreases = 272 + 988 + 2266
value of the available-for-sale investments from 2008 to 2010 decreases = $ 3526 thousand
NoUnrealized loss on available-for-sale investments is not shown in the income statement but it is shown below the net income as comprehensive income or losses
2)
Translation Method does Red Hat use to translate foreign subsidiaries , As per IFRS & GAAP , Asset & Liability are to valued at using spot rate or Current rate method
3)
change in the translation adjustment from 2008 to 2010 = 8609 - 8283 -309
change in the translation adjustment from 2008 to 2010 = $ 17 thousand
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