Cost of goods sold is most likely dominated by purchases made in the current

Cost of goods sold is most likely dominated by

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Cost of goods sold is most likely dominated by purchases made in the current year, and therefore the remeasured amount is unlikely to differ significantly from the translated amount. Liquidation of old LIFO layers could create significant differences.In summary, then, historical rates are lower than current or average rates for Asiamart’s Hong Kong subsidiaries. So expenses remeasured at historical rates, such as depreciation and amortization, are lower than expenses measured at average rates. The table below shows the impact of remeasured expenses and the remeasurement gain on net income. Impact on 2008 net incomeExpenses remeasured at historical ratesincreaseInclusion of remeasurement gain in incomeincreaseAsiamart’s remeasured 2008 net income therefore is likely to be higher than its translated income. Asiamart’s operating income, excluding the remeasurement gain, is also higher.©Cambridge Business Publishers, 201326Advanced Accounting, 2nd Edition
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P7.9Translated/Remeasured Trial Balancesa. and b.Account£Balance $/£$Remeasurement$/£$TranslationCash and receivables£ 2,660 2.20$ 5,852 2.20$ 5,852 Inventory2,500 (a)4,575 2.205,500 Plant assets1,800 (b)3,310 2.203,960 Accumulated depreciation(560)1.80(1,008)2.20(1,232)Accounts payable(2,200)2.20(4,840)2.20(4,840)Long-term debt(1,100)2.20(2,420)2.20(2,420)Equity(2,100)(c)(3,520)(c)(4,200)Sales(4,000)2.10(8,400)2.10(8,400)Cost of goods sold2,000 2.124,240 2.104,200 Depreciation expense160 1.80288 2.10336 Other operating expenses840 2.101,764 2.101,764 Remeasurement loss(d)159 Other comprehensive income__________(e)(520)£ 0 $ 0$ 0(a)$4,575 = ($1.80 x 2,200) + ($2.05 x 300)(b)$3,310 = ($1.80 x 1,600) + ($2.15 x 200)(c)The remeasured (translated) balance of equity at January 1, 2013, is given as $3,520 ($4,200).NOTE:Since no depreciation was taken on the plant assets purchased in 2013, both accumulated depreciation and depreciation expense relate only to the plant assets purchased when the exchange rate was $1.80/£.(d)Calculation of Remeasurement Loss£$/£$Exposed position, January 1, 2013£ (1,300) 2.00$(2,600)Plus sales4,000 2.108,400 Less purchase of plant assets(200) 2.15(430)Less purchase of LIFO layer(300) 2.05(615)Less purchase of goods sold(2,000) 2.12(4,240)Less other operating expenses(840) 2.10(1,764)(1,249)Exposed position, December 31, 2013£ (640) 2.20- (1,408)Remeasurement loss (income)$ 159©Cambridge Business Publishers, 2013Solutions Manual, Chapter 727
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(e)Calculation of Translation Gain£$/£$Exposed position (net assets), January 1, 2013£2,1002.00$4,200 Plus net income in 2013 (4,000-2,000-160-840)1,0002.102,100$6,300 Exposed position (net assets), December 31, 2013£3,1002.20- 6,820Translation gain (OCI)$(520)P7.10Translating and Remeasuring Financial StatementsSA Company Financial Statements Year ended December 31, 2014(a) Remeasurement(b) Translation Balance SheetP$/P$$/P$CashP 310,000 .15$ 46,500 .15$ 46,500 Inventory (purchased 1/5)200,000 .1020,000 .1530,000 Inventory (purchased 6/30)360,000 .1243,200.1554,000Office equipment, net180,000 .1018,000 .1527,000Total assets1,050,000127,700 157,500 Contributed capital1,000,000 .10100,000 .10100,000 Retained earnings50,000 27,700 6,000 Accumulated other comprehensive income_______ ______ 51,500Total EquitiesP1,050,000 $127,700$157,500 Income StatementP$/P$$/P$SalesP 300,000 .12$ 36,000 .12$ 36,000 Cost of goods sold(200,000).10(20,000).12(24,000)Rent expense(30,000).12(3,600).12(3,600)Depreciation expense(20,000).10(2,000).12(2,400)Remeasurement gain-- 17,300_____ Net incomeP 50,000$ 27,700$ 6,000 ©Cambridge Business Publishers, 201328Advanced Accounting, 2nd Edition
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Computation of Translation and Remeasurement GainsRemeasurementTranslation P$/P$P$/P$Exposed position, Jan. 1, 2014P1,000,000a.10$ 100,000 P1,000,000a.10$100,000 Plus: Sale of inventory300,000 .1236,000 300,000 .1236,000 Less:Purchase of inventory (1/5)(400,000).10
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