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

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
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
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

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)....
View Full Document

Ask a homework question - tutors are online