Question

Assume that Deepa Corporation has a subsidiary company based in Japan.

Requirements
1. Translate into dollars the foreign-currency balance sheet of the Japanese subsidiary of
Deepa.
Yen___
Assets..................................... ¥390,000,000
Liabilities................................¥145,000,000
Stockholders’ equity:
Common stock....................... 21,000,000
Retained earnings................... 224,000,000
¥390,000,000
When Deepa acquired this subsidiary, the Japanese yen was worth $0.0088. The current exchange rate is $0.0103. During the period when the subsidiary earned its income, the average exchange rate was $0.0092 per yen. Before you perform the foreign-currency translation calculations, indicate whether Deepa has experienced a positive or a negative translation adjustment. State whether the adjustment is a gain or a loss, and show where it is reported in the financial statements.
2. To which company does the foreign-currency translation adjustment “belong”? In which company’s financial statements will the translation adjustment be reported?



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  • CreatedJuly 25, 2014
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