Alexander Corporation (a U.S.-based company) acquired 100 percent of a

Alexander Corporation (a U.S.-based company) acquired 100 percent of a Swiss company for 8.2 million Swiss francs on December 20, Year 1. At the date of acquisition, the exchange rate was $0.70 per franc. The acquisition price is attributable to the following assets and liabilities denominated in Swiss francs:
Cash …………………................ 1,000,000
Inventory ……………................ 2,000,000
Fixed assets ……………............. 7,000,000
Notes payable ……………..........(1,800,000)
Alexander Corporation prepares consolidated financial statements on December 31, Year 1. By that date, the Swiss franc appreciated to $0.75. Because of the year-end holidays, no transactions took place between the date of acquisition and the end of the year.
Required:
a. Determine the translation adjustment to be reported on Alexander's December 31, Year 1, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary's functional currency? What is the economic relevance of this translation adjustment?
b. Determine the remeasurement gain or loss to be reported in Alexander's Year 1 consolidated income, assuming that the U.S. dollar is the functional currency. What is the economic relevance of this remeasurement gain or loss?
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...

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