A domestic company's 100%-owned foreign subsidiary located in Switzerland submitted the following income statement for 2006:
Additional information:
a. Inventory decreased 100,000 francs during 2006.
b. Sales, purchases, and operating expenses occurred or were incurred evenly throughout the year. (Operating expenses include depreciation expense of 100,000 francs.)
c. The subsidiary, whose functional currency is the U.S. dollar, had at the beginning of 2006 monetary assets of 1,000,000 francs, monetary liabilities of 700,000 Swiss francs, and stockholders' equity of 1,500,000 Swiss francs.
d. On 10/19/06, the subsidiary declared and paid a cash dividend of 200,000 Swiss francs.
e. Cash disbursements for 2006 were 2,500,000 francs.
f. Direct exchange rate information follows:
Required:
Calculate the 2006 foreign currency transaction gain or loss arising from the change in the exchange rate.

Question

A domestic company's 100%-owned foreign subsidiary located in Switzerland submitted the following income statement for 2006:
  Additional information:
a. Inventory decreased 100,000 francs during 2006.
b. Sales, purchases, and operating expenses occurred or were incurred evenly throughout the year. (Operating expenses include depreciation expense of 100,000 francs.)
c. The subsidiary, whose functional currency is the U.S. dollar, had at the beginning of 2006 monetary assets of 1,000,000 francs, monetary liabilities of 700,000 Swiss francs, and stockholders' equity of 1,500,000 Swiss francs.
d. On 10/19/06, the subsidiary declared and paid a cash dividend of 200,000 Swiss francs.
e. Cash disbursements for 2006 were 2,500,000 francs.
f. Direct exchange rate information follows:
  Required:
Calculate the 2006 foreign currency transaction gain or loss arising from the change in the exchange rate.

Quizplus · Accepted Answer

The Answer of A domestic company's 100%-owned foreign subsidiary located in Switzerland submitted the following income statement for 2006:
  Additional information:
a. Inventory decreased 100,000 francs during 2006.
b. Sales, purchases, and operating expenses occurred or were incurred evenly throughout the year. (Operating expenses include depreciation expense of 100,000 francs.)
c. The subsidiary, whose functional currency is the U.S. dollar, had at the beginning of 2006 monetary assets of 1,000,000 francs, monetary liabilities of 700,000 Swiss francs, and stockholders' equity of 1,500,000 Swiss francs.
d. On 10/19/06, the subsidiary declared and paid a cash dividend of 200,000 Swiss francs.
e. Cash disbursements for 2006 were 2,500,000 francs.
f. Direct exchange rate information follows:
  Required:
Calculate the 2006 foreign currency transaction gain or loss arising from the change in the exchange rate.

A Domestic Company's 100%-Owned Foreign Subsidiary Located in Switzerland Submitted