The following account balances are for the Agee Company as of January 1, 2013, a
ID: 2426440 • Letter: T
Question
The following account balances are for the Agee Company as of January 1, 2013, and December 31, 2013. All figures are denominated in kroner (Kr).
Agee issued additional shares of common stock during the year on April 1, 2013. Common stock at January 1, 2013, was sold at the start of operations in 2004.
It purchased buildings in 2005 and sold one building with a book value of Kr 15,500 on July 1 of the current year.
Relevant exchange rates for 1 Kr were as follows:
Assuming the U.S. dollar is the functional currency and retained earnings at January 1, 2013, total $60,600, what is the remeasurement gain or loss for 2013? (Input the amount as a positive value.)
Assuming the foreign currency is the functional currency and retained earnings at January 1, 2013, total $70,319, what is the translation adjustment for 2013? (Input the amount as a positive value.)
January 1, 2013 December31, 2013 Accounts payable (6,000) (18,500) Accounts receivable 37,000 87,000 Accumulated depreciation—buildings (28,000) (33,000) Accumulated depreciation—equipment 0 (5,800) Bonds payable—due 2016 (58,000) (58,000) Buildings 117,000 96,500 Cash 43,000 8,800 Common stock (67,000) (77,000) Depreciation expense 0 23,000 Dividends (10/1/13) 0 40,000 Equipment 0 38,000 Gain on sale of building 0 (6,800) Rent expense 0 18,800 Retained earnings (38,000) (38,000) Salary expense 0 28,000 Sales 0 (112,000) Utilities expense 0 9,000
Explanation / Answer
a.
The remeasurement of exchange gain or loss is calculated as under:
All the monetary assets and liabilities are calculated at current rates like accounts payable, accounts receivables, cash, inventory and bonds payable.
All the non monetary assets and liabilities are calculated at historical costs like, accumulated depreciation of building and equipment, building and equipment assets, gain on sale of building.
All the other expenses like, utilities, salaries, rent and sales are calculated at average exchange rate.
The retained earnings are taken as given.
Accounts payable
-6000
-18500
$2.90
$3.40
($17,400.00)
($62,900.00)
Accounts receivable
37000
87000
$2.90
$3.40
$107,300.00
$295,800.00
Accumulated depreciation—buildings
-28000
-33000
$2.60
$2.60
($72,800.00)
($85,800.00)
Accumulated depreciation—equipment
0
-5800
$3.00
$3.00
$0.00
($17,400.00)
Bonds payable—due 2016
-58000
-58000
$2.90
$3.40
($168,200.00)
($197,200.00)
Buildings
117000
96500
$2.60
$2.60
$304,200.00
$250,900.00
Cash
43000
8800
$2.90
$3.40
$124,700.00
$29,920.00
Common stock
-67000
-77000
$2.90
$2.9&$3.00
($194,300.00)
($224,300.00)
Depreciation expense
0
23000
$0.00
$3.00 & $2.60
$0.00
$62,120.00
Dividends (10/1/13)
0
40000
$0.00
$3.30
$0.00
$132,000.00
Equipment
0
38000
$0.00
$3.00
$0.00
$114,000.00
Gain on sale of building
0
-6800
$0.00
$3.20
$0.00
($21,760.00)
Rent expense
0
18800
$0.00
$3.10
$0.00
$58,280.00
Retained earnings
-38000
-38000
$ 2.90
$2.90
($60,600.00)
($60,600.00)
Salary expense
0
28000
$0.00
$3.10
$0.00
$86,800.00
Sales
0
-112000
$0.00
$3.10
$0.00
($347,200.00)
Utilities expense
0
9000
$0.00
$3.10
$0.00
$27,900.00
Remeasurement gain/loss
$22,900.00
$40,560.00
b.
The translation exchange gain or loss is calculated by converting all the assets and liabilities at current rate as on balance sheet. All the revenues and expenses are calculated at average exchange rate. Retained earnings are calculated at historical exchange rate
1-Jan-13
December
1-Jan-13
December
31, 2013
Exchange Rate
31, 2013
Accounts payable
-6000
-18500
$2.90
$3.40
($17,400.00)
($62,900.00)
Accounts receivable
37000
87000
$2.90
$3.40
$107,300.00
$295,800.00
Accumulated depreciation—buildings
-28000
-33000
$2.90
$3.40
($81,200.00)
($112,200.00)
Accumulated depreciation—equipment
0
-5800
$2.90
$3.40
$0.00
($19,720.00)
Bonds payable—due 2016
-58000
-58000
$2.90
$3.40
($168,200.00)
($197,200.00)
Buildings
117000
96500
$2.90
$3.40
$339,300.00
$328,100.00
Cash
43000
8800
$2.90
$3.40
$124,700.00
$29,920.00
Common stock
-67000
-77000
$2.90
$3.40
($194,300.00)
($261,800.00)
Depreciation expense
0
23000
$0.00
3.1
$0.00
$71,300.00
Dividends (10/1/13)
0
40000
$0.00
$3.30
$0.00
$132,000.00
Equipment
0
38000
$2.90
$3.40
$0.00
$129,200.00
Gain on sale of building
0
-6800
$0.00
$3.10
$0.00
($21,080.00)
Rent expense
0
18800
$0.00
$3.10
$0.00
$58,280.00
Retained earnings
-38000
-38000
$ 2.90
$2.90
($110,200.00)
($110,200.00)
Salary expense
0
28000
$0.00
$3.10
$0.00
$86,800.00
Sales
0
-112000
$0.00
$3.10
$0.00
($347,200.00)
Utilities expense
0
9000
$0.00
$3.10
$0.00
$27,900.00
Remeasurement gain/loss
$0.00
$27,000.00
Accounts payable
-6000
-18500
$2.90
$3.40
($17,400.00)
($62,900.00)
Accounts receivable
37000
87000
$2.90
$3.40
$107,300.00
$295,800.00
Accumulated depreciation—buildings
-28000
-33000
$2.60
$2.60
($72,800.00)
($85,800.00)
Accumulated depreciation—equipment
0
-5800
$3.00
$3.00
$0.00
($17,400.00)
Bonds payable—due 2016
-58000
-58000
$2.90
$3.40
($168,200.00)
($197,200.00)
Buildings
117000
96500
$2.60
$2.60
$304,200.00
$250,900.00
Cash
43000
8800
$2.90
$3.40
$124,700.00
$29,920.00
Common stock
-67000
-77000
$2.90
$2.9&$3.00
($194,300.00)
($224,300.00)
Depreciation expense
0
23000
$0.00
$3.00 & $2.60
$0.00
$62,120.00
Dividends (10/1/13)
0
40000
$0.00
$3.30
$0.00
$132,000.00
Equipment
0
38000
$0.00
$3.00
$0.00
$114,000.00
Gain on sale of building
0
-6800
$0.00
$3.20
$0.00
($21,760.00)
Rent expense
0
18800
$0.00
$3.10
$0.00
$58,280.00
Retained earnings
-38000
-38000
$ 2.90
$2.90
($60,600.00)
($60,600.00)
Salary expense
0
28000
$0.00
$3.10
$0.00
$86,800.00
Sales
0
-112000
$0.00
$3.10
$0.00
($347,200.00)
Utilities expense
0
9000
$0.00
$3.10
$0.00
$27,900.00
Remeasurement gain/loss
$22,900.00
$40,560.00