Chapter 10-9 - Beginning net monetary liability position KM...

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CHAPTER 10 TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS Answers to Problems 27. (25 minutes) (Compute translation adjustment and remeasurement gain or loss) a. Translation—only changes in net assets have an impact on the computation of the translation adjustment. Net asset balance 1/1 KM30,000 x $.32 = $ 9,600 Increases in net assets (income): Sold inventory at a profit 5/1 5,000 x $.34 = 1,700 Sold land at a gain 6/1 1,000 x $.35 = 350 Decreases in net assets: Paid a dividend 12/1 (3,000) x $.41 = (1,230) Depreciation recorded (2,000 ) x $.37 = ( 740 ) Net asset balance 12/31 KM31,000 $ 9,680 Net asset balance 12/31 at current exchange rate KM31,000 x $.42 = (13,020 ) Translation adjustment—positive $(3,340 ) b. Remeasurement—only changes in net monetary assets and liabilities have an impact on the computation of the remeasurement gain.
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Unformatted text preview: Beginning net monetary liability position KM (3,000) x $.32 = $ ( 960) Increases in monetary assets: Sold inventory 5/1 15,000 x $.34 = 5,100 Sold land 6/1 5,000 x $.35 = 1,750 Decreases in monetary assets: Bought inventory 10/1 (12,000) x $.39 = (4,680) Bought land 11/1 (4,000) x $.40 = (1,600) Paid a dividend 12/1 (3,000 ) x $.41 = (1,230 ) Ending net monetary liability position KM(2,000 ) $(1,620) Ending net monetary liability position at current exchange rate KM(2,000 ) x $.42 = (840 ) Remeasurement gain $ (780 ) 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....
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This note was uploaded on 02/08/2012 for the course ACCOUNTING 559 taught by Professor Keating during the Spring '07 term at DeVry Addison.

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Chapter 10-9 - Beginning net monetary liability position KM...

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