A parent entity has recognised an increase of $50 000 in a Loan Receivable from a foreign subsidiary as a result of a change in exchange rates. On consolidation the following adjustment is necessary:
A) $\begin{array} { l c c }
\text { DR } & \text { Exchange gain } & \$ 50,000 \
\text { CR } & \text { Foreign currency translation reserve } & \$ 50,000 ;
\end{array}$
B) $\begin{array} { l c c c }
\text { DR } & \text { Exchange gain } & \$ 50,000 & \
\text { CR } & \text { Loan receivable } & & \$ 50,000 ;
\end{array}$
C) $\begin{array} { l c c c }
\text { DR } & \text { Loan receivable } & \$ 50,000 & \
\text { CR } & \text { Foreign currency translation reserve } & \$ 50,000 ;
\end{array}$
D) $\begin{array} { l c c c }
\text { DR } & \text { Foreign currency translation reserve } & \$ 50,000 & \
\text { CR } & \text { Exchange gain } & \$ 50,000 .
\end{array}$

Question

A parent entity has recognised an increase of $50 000 in a Loan Receivable from a foreign subsidiary as a result of a change in exchange rates. On consolidation the following adjustment is necessary:
A) $\begin{array} { l c c } 
\text { DR } & \text { Exchange gain } & \$ 50,000 \
\text { CR } & \text { Foreign currency translation reserve } & \$ 50,000 ;
\end{array}$
B) $\begin{array} { l c c c } 
\text { DR } & \text { Exchange gain } & \$ 50,000 & \
\text { CR } & \text { Loan receivable } & & \$ 50,000 ;
\end{array}$
C) $\begin{array} { l c c c } 
\text { DR } & \text { Loan receivable } & \$ 50,000 & \
\text { CR } & \text { Foreign currency translation reserve } & \$ 50,000 ;
\end{array}$
D) $\begin{array} { l c c c } 
\text { DR } & \text { Foreign currency translation reserve } & \$ 50,000 & \
\text { CR } & \text { Exchange gain } &  \$ 50,000 .
\end{array}$

Quizplus · Accepted Answer

The increase in the loan receivable due to exchange rate changes should be recognized in the foreign currency translation reserve on consolidation, as it relates to a foreign subsidiary.

A Parent Entity Has Recognised an Increase of $50 000