Foreign Sub is a wholly owned subsidiary of U.S. Domestic Corporation. U.S. Domestic Corporation acquired the subsidiary several years ago. The financial statements for Foreign Sub for 2020 in its own currency appear below:

Balance Sheet (In Foreign Currency Units)

	December 31, 2019	December 31, 2020
Cash	106	156
Accounts Receivable	369	350
Inventories	383	408
Land	556	686
Total Assets	1414	1600
Accounts Payable	264	129
Long-term debt	227	292
Common Stock	526	608
Retained Earnings	397	571
Total Liabilities and Equities	1414	1600

Income Statement (In Foreign Currency Units)

	For 2020
Sales	5187
Costs of Goods Sold	(4150)
Selling and administrative expenses	(449)
Income taxes	(206)
Net income	382
Dividend declared and paid on December 31	(208)
Increase (decrease) in Retained Earnings	174

The exchange rates between the U.S. dollar and the foreign currency of the subsidiary are:

December 31, 2019	$9.0:1FC
Average 2020	$7.5:1 FC
December 31, 2020	$6.0:1 FC

On January 1, 2020, Foreign Sub issued FC120 of long-term debt and FC120 of common stock in the
acquisition of land costing FC240. Operating activities occurred evenly over the year.
a. Assume that the currency of Foreign Sub is the functional currency. Compute the change in the cumulative translation adjustment for 2020.
b. Assume that the U.S. dollar is the functional currency. Compute the amount of the translation gain or loss for 2020.

Answer rating: 100% (QA)

a The change in the cumulative translation adjustment for 2020 is 2000 To calculate the change in th... View the full answer