Question

Slocome Travel owns a travel agency that operates in London. Account balances in pounds for the subsidiary are summarized below:


Exchange rates for 2008 were as follows:
January 1........... $1.5403
December 31........ 1.5961
Average for year...... 1.5532
The subsidiary did not make any purchases of office supplies or plant assets during the year. Revenues were earned and operating expenses, other than depreciation and supplies used, were incurred evenly throughout the year.

Required:
A. Prepare a schedule to compute the translation adjustment for the year, assuming the foreign entity’s functional currency is the pound.
B. Prepare a schedule to compute the translation gain or loss, assuming the foreign entity’s functional currency is the U.S. dollar.
C. Explain why your results differ under the twomethods.


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  • CreatedMarch 13, 2015
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