The following account balances are for the Agee Company as of January 1, 2017, a
ID: 2538101 • 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 22,500 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).
(Input all answers as positive.)
January 1, 2017 December 31, 2017 Accounts payable (18,000 ) (32,500 ) Accounts receivable 51,000 101,000 Accumulated depreciation—buildings (42,000 ) (47,000 ) Accumulated depreciation—equipment 0 (7,200 ) Bonds payable—due 2020 (61,000 ) (61,000 ) Buildings 131,000 103,500 Cash 57,000 10,200 Common stock (66,000 ) (76,000 ) Depreciation expense 0 37,000 Dividends (10/1/17) 0 54,000 Equipment 0 61,000 Gain on sale of building 0 (8,200 ) Rent expense 0 20,700 Retained earnings (52,000 ) (52,000 ) Salary expense 0 42,000 Sales 0 (151,000 ) Utilities expense 0 5,500Explanation / Answer
Assuming US dollar is the functional cuurency of operation:
Remeasurement gain or loss for 2017 would be the amount of remeasurement loss for 2016 subject to adjustment for income statement line items reported in the trial balance after the application of conversion factor.
The income statement line items would be converted at the average exchange rate for the current year i.e. 3.05.
Remeasuremnet gain for 2017= Remesurement loss for 2016+ Depreciation expense for building and equipment-gain on sale of building + rent expense+salary expense+utility expense-sales revenue
=$28300+$21960+$128100+$63135+$128100+$16775-$25830-$460550
=$-100,010
Therefore, the remeasurement gain for 2017 would amount to $-100,010.
Now if we assume Kroner (kr) to be the functional currency
Remeasuremnet gain for 2017= Remeasurement gain for 2016- Depreciation expense for building and equipment+gain on sale of building - rent expense-salary expense-utility expense+sales revenue.
=3163.93-7200-42000+8200-20700-42000-5500+151000
=Kr44,963.93
Therefore, the remeasurement gain for 2017 would amount to Kr44,963.93.