The following account balances are for the Agee Company as of January 1, 2017, a
ID: 2530796 • Letter: T
Question
The following account balances are for the Agee Company as of January 1, 2017, and December 31, 2017. All amounts are denominated in kroner (Kr).
Additional Information
Agee issued additional shares of common stock during the year on April 1, 2017. Common stock at January 1, 2017, was sold at the start of operations in 2010.
Agee purchased buildings in 2011 and sold one building with a book value of Kr 1,500 on July 1 of the current year.
Equipment was acquired on April 1, 2017.
Relevant exchange rates for 1 Kr were as follows:
Assuming the U.S. dollar is the functional currency, what is the remeasurement gain or loss for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $145,200, which included a remeasurement loss of $28,300.
Assuming the foreign currency is the functional currency, what is the translation adjustment for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $162,250, and a cumulative translation adjustment of $9,650 (credit balance).
January 1, 2017 December 31, 2017 Accounts payable (15,000 ) (25,000 ) Accounts receivable 54,000 104,000 Accumulated depreciation—buildings (45,000 ) (50,000 ) Accumulated depreciation—equipment 0 (7,500 ) Bonds payable—due 2020 (64,000 ) (64,000 ) Buildings 134,000 105,000 Cash 60,000 10,500 Common stock (69,000 ) (82,000 ) Depreciation expense 0 40,000 Dividends (10/1/17) 0 57,000 Equipment 0 64,000 Gain on sale of building 0 (8,500 ) Rent expense 0 21,500 Retained earnings (55,000 ) (55,000 ) Salary expense 0 45,000 Sales 0 (162,000 ) Utilities expense 0 7,000Explanation / Answer
Answer :-
1) Remeasurement Gain or Loss
Net Monetray Assets as on 1st Jan 2017 = (Cash + Accounts Receivable) - (Accounts Payable + Bonds Payable)
= (60,000 + 54,000) - (15,000 + 64,000) = 35,000
Building Sold = Gain on Sale of Building + Book Value of Building Sold
= 8,500 + 1,500 = 10,000
Net Monetary Assets as on 31st Dec 2017 = Net Monetary Assets as on 1st Jan 2017 + Increase in Net Monetary Assets - Decrease in Net Monetary Assets
= 25,500
As per Calculation
Net Monetary Assets on 31st Dec 2017 (US $) = $69,300
But according to Exchange Rate
Net Monetary Assets on 31st Dec 2017 at Exchange Rate (US $) = $89,250
Hence there is a gain of $19,950
KR Exchange Rate US $ Net Monetary Assets 1 Jan 2017 35,000 $3.00 $105,000 Increases in Net Monetary Assets :- Issued Common Stock 1 April 2017 13,000 $3.10 $40,300 Sold Building 1 July 2017 10,000 $3.30 $33,000 Sales 2017 162,000 $3.20 $518,400 Decreases in Net Monetary Assets Purchased Equipment 1 April 2017 (64,000) $3.10 ($198,400) Paid Dividends 1 Oct 2017 (57,000) $3.40 ($193,800) Rent Dividends 2017 (21,500) $3.20 ($68,800) Salary Expense 2017 (45,000) $3.20 ($144,000) Utilities Expense 2017 (7,000) $3.20 ($22,400) Net Monetary Assets 31 Dec 2017 25,500 $69,300 Net Monetary Assets 31 Dec 2017 at Current Exchange Rate 25,500 $3.50 $89,250 Remeasurement Gain (Credit) ($19,950) (Net Monetary Assets - Net Monetary Assets at Current Exchange Rate)