Trojan Corporation USA borrowed 1,000,000 New Zealand dollars (NZ$) at the beginning of the calendar year when the exchange rate was $0 60 NZ$1 Before repaying this one year loan, Trojan learns that the NZ dollar has appreciated to $0 70 NZ$1 It discovers, also, that its New Zealand subsidiary has ...

If the US dollar is the functional currency the translation gain upon con ...

Trojan Corporation USA borrowed 1,000,000 New Zealand dollars (NZ$) at the beginning of the calendar year when

Question:

Trojan USA borrowed 1,000,000 New Zealand dollars (NZ$) at the beginning of the calendar year when the was $0.60 = NZ$1. Before repaying this one-year loan, Trojan learns that the NZ dollar has appreciated to $0.70 = NZ$1. It discovers, also, that its New Zealand subsidiary has an exposed net asset position of NZ$ 3,000,000, which will produce a translation gain upon consolidation. What is the amount of the exchange gain or loss that will be reported in consolidated income if:
a. The U.S. dollar is the foreign operation’s functional currency?
b. The New Zealand dollar is the foreign operation’s functional currency and Trojan designates the New Zealand dollar borrowing as a hedge of the New Zealand affiliate’s positive exposure?

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...