Ace Corporation starts a foreign subsidiary on January 1 by
Ace Corporation starts a foreign subsidiary on January 1 by investing 20,000 pulas. Ace owns all of the shares of the subsidiary’s common stock. The foreign subsidiary generates 10,000 pulas of net income throughout the year and pays no dividends. The pula is the foreign company’s functional currency. Currency exchange rates for 1 pula are as follows:
January 1 . . . . . . . . . . . . . . . . . . . . . . . $0.15 = 1 pula
Average for the year . . . . . . . . . . . . . . 0.19 = 1
December 31 . . . . . . . . . . . . . . . . . . . . 0.21 = 1
In preparing consolidated financial statements, what translation adjustment will Ace report at the end of the current year?
a. $400 positive (credit).
b. $600 positive (credit).
c. $1,400 positive (credit).
d. $1,800 positive (credit).

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