PLEASE HELP!! On December 18, 2017, Stephanie Corporation acquired 100 percent o

Question

PLEASE HELP!!

On December 18, 2017, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 million Swiss francS (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 CHF1. On December 18, 2017, the book and fair values of the subsidiary's assets and liabilities were: Cash Inventory Property, plant & equipment Notes payable CHF 800,000 1,300,08e 4,000,000 (2,100,000) Stephanie prepares consolidated financial statements on December 31, 2017, By that date, the Swiss franc has appreciated to $110 = CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation a. Determine the translation adjustment to be reported on Stephanie's December 31, 2017, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary's functional currency. What is the economic relevance of this translation adjustment? b. Determine the remeasurement gain or loss to be reported in Stephanie's 2017 consolidated net income, assuming that the U.S dollar is the functional currency. What is the economic relevance of this remeasurement gain or loss? a. Translation adjustment

Explanation / Answer

CHF translation rate us $ Remeasurement rate us $
Cash 800000 1.1 880000 1.1 880000
Inventory 1300000 1.1 1430000 1 1300000
property , plant and equipement 4000000 1.1 4400000 1 4000000
Total 6100000 1.1 6710000 6180000
Notes payable 2100000 1.1 2310000 1.1 2310000
owners equity 4000000 1 4000000 1 4000000
translation adjustment 400000
retained earnings (remeasurement loss) -130000
Total 6100000 6710000 6180000
Translation adjustment increases shareholders equity by 4000000

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