# Question

Ace Corporation starts a subsidiary in a foreign country; the subsidiary has the peso as its functional currency. On January 1, Ace buys all of the subsidiaryâ€™s common stock for 20,000 pesos. On April 1, the subsidiary purchases inventory for 20,000 pesos with payment made on May 1, and sells this inventory on August 1 for 30,000 pesos, which it collects on October 1. Currency exchange rates for 1 peso are as follows:
January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . \$0.15 = 1 peso
April 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.17 = 1
May 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.18 = 1
August 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.19 = 1
October 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.20 = 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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