In general, if the Japanese subsidiary of a U.S. company firm translates its financial statements according to the current rate method during a period when the value of the Japanese yen is falling against the reporting currency (the U.S. dollar) , the subsidiary will recognize a
A) translation gain in the income statement.
B) translation loss in the income statement.
C) translation gain in the accumulated translation adjustment account in owners' equity.
D) translation loss in the accumulated translation adjustment account in owners' equity.

Question

Quizplus · Accepted Answer

When the yen depreciates against the dollar, the value of the subsidiary's assets and liabilities, when translated into dollars, decreases. This results in a translation loss, which is recorded in the accumulated translation adjustment account in owners' equity, not in the income statement.

In General, If the Japanese Subsidiary of a U