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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2008 January December 31 Cash and Receivables Office Supplies Land, Building, and Equipment Accounts Payable Long-Term Note Payable Common Stock Retained Earnings Dividends Declared and Paid on December 31 Revenues Operating Expenses 35,000 32,000 1,500 70,000 (15,500) (25,000) (40,000) (23,000) 900 65,000 (6,900) (15,000) (40,000) (23,000) 4,000 (40,000) Totals