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Kaplan AC 450 Advanced Accounting Unit 7 Problem 10-30

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Question;Problem 10-30 [LO3, LO5]Board Company has a foreign subsidiary that began operations at the start of 2013 with assets of 153,000 kites (the local currency unit) and liabilities of 96,000 kites. During this initial year of operation, the subsidiary reported a profit of 47,000 kites. It distributed two dividends, each for 7,100 kites with one dividend paid on March 1 and the other on October 1. Applicable exchange rates for 1 kite follow: January 1, 2013 (start of business) $ 0.79 March 1, 2013 0.77 Weighted average rate for 2013 0.76 October 1, 2013 0.75 December 31, 2013 0.74 ________________________________________a. Assume that the kite is this subsidiary?s functional currency. What translation adjustment would Board report for the year 2013? (Input the amount as a positive value.)b. Assume that on October 1, 2013, Board entered into a forward exchange contract to hedge the net investment in this subsidiary. On that date, Board agreed to sell 205,000 kites in three months at a forward exchange rate of $0.75/1 kite. Prepare the journal entries required by this forward contract.(Leave no cells blank. If no entry is required, select "No Journal Entry Required" in the account field and zero (0) in the amount field.)c. Compute the net translation adjustment for Board to report in Accumulated Other Comprehensive Income for the year 2013 under this second set of circumstances. (Input the amount as a positive value.)

 

Paper#40842 | Written in 18-Jul-2015

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