Zugar Company is domiciled in a country whose currency is the dinar. Zugar begin
ID: 2568569 • Letter: Z
Question
Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2017 with three assets: cash of 20,000 dinars, accounts receivable of 80,000 dinars, and land that cost 200,000 dinars when acquired on April 1, 2016. On January 1, 2017, Zugar has a 150,000 dinar note payable, and no other liabilities. On May 1, 2017, Zugar renders services to a customer for 120,000 dinars, which was immediately paid in cash. On June 1, 2017, Zugar incurred a 100,000 dinar operating expense, which was immediately paid in cash. No other transactions occurred during the year. Currency exchange rates for 1 dinar follow:
April 1, 2016
$0.33 = 1 dinar
January 1, 2017
0.36 = 1
May 1, 2017
0.37 = 1
June 1, 2017
0.39 = 1
December 31, 2017
0.41 = 1
a. Assume that Zugar is a foreign subsidiary of a U.S. multinational company that uses the U.S. dollar as its reporting currency. Assume also that the dinar is the subsidiary’s functional currency. What is the translation adjustment for this subsidiary for the year 2017?
b. Assume that Zugar is a foreign subsidiary of a U.S. multinational company that uses the U.S. dollar as its reporting currency. Assume also that the U.S. dollar is the subsidiary’s functional currency. What is the remeasurement gain or loss for 2017?
c. Assume that Zugar is a foreign subsidiary of a U.S. multinational company. On the December 31, 2017, balance sheet, what is the translated value of the Land account? On the December 31, 2017, balance sheet, what is the remeasured value of the Land account?
April 1, 2016
$0.33 = 1 dinar
January 1, 2017
0.36 = 1
May 1, 2017
0.37 = 1
June 1, 2017
0.39 = 1
December 31, 2017
0.41 = 1
Explanation / Answer
Part 1
Assets
Therefore Adjustment entry will be
CASH A/c Dr. 1000
AR A/c Dr. 4000
Land A/c Dr. 6000
Notes payale A/c Cr 7500
CTA A/c Cr 3500
Part 1
Assets
Balance As of 1 Jan 2017 FC rate as of 1 Jan 2017 Converted Value (A) Conversion rate as of 31 dec 2017 Converted Value as of 31 Dec 2017 (b) Difference Cash 20000 0.36 7200 0.41 8200 -1000 AR 80000 0.36 28800 0.41 32800 -4000 Land 120000 0.36 43200 0.41 49200 -6000 -11000 Liabilities Notes payable 150000 0.36 54000 0.41 61500 -7500 Capital 70000 0.36 25200 0.36 25200 0 Profit as on 31 st dec 2017 20000 0.385 7700Related Questions
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