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Chapter 10-11

# Chapter 10-11 - an adjustment to the translation adjustment...

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CHAPTER 10 TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS Answers to Problems 30. (30 minutes) (Hedge of balance sheet exposure) a. Net assets, 1/1 (132,000 54,000) 78,000 kites x \$0.80 = \$62,400 Change in net assets: Net income 26,000 kites x \$0.77 = 20,020 Dividends, 3/1 (5,000) kites x \$0.78 = (3,900) Dividends, 10/1 (5,000 ) kites x \$0.76 = (3,800 ) Net assets, 12/31 94,000 kites \$74,720 Net assets at current exchange rate, 12/31 94,000 kites x \$0.75 = 70,500 Translation adjustment (negative) \$ 4,220 b. Forward contract journal entries 10/1 No entry 12/31 Forward Contract .................................. 2,000 Translation Adjustment (positive). . 2,000 (To record the change in the value of the forward contract as
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Unformatted text preview: an adjustment to the translation adjustment) Foreign Currency (kites). ..................... 150,000 Cash. ................................................. 150,000 (To record the purchase of 200,000 kites at the spot rate of \$.75) Cash . ................................................... 152,000 Foreign Currency (kites). ................ 150,000 Forward Contract. ........................... 2,000 (To record delivery of 200,000 kites, receipt of \$152,000, and close the forward contract account.) c. The net negative translation adjustment (debit balance) to be reported in other comprehensive income at 12/31 is \$2,220 (\$4,220 – \$2,000)....
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