Question

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

Requirements
1. Translate into dollars the foreign-currency balance sheet of the Japanese subsidiary of Patel.
Yen____
Assets...................................... ¥515,000,000
Liabilities................................ ¥145,000,000
Stockholders’ equity:
Common stock...................... 18,000,000
Retained earnings.................. 352,000,000
¥515,000,000
When Patel acquired this subsidiary, the Japanese yen was worth $0.0092. The current exchange rate is $0.0107. During the period when the subsidiary earned its income, the average exchange rate was $0.0095 per yen. Before you perform the foreign-currency translation calculations, indicate whether Patel 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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