Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik

تمرين 53

Diekmann Company, a U.S.-based company, acquired a 100 percent interest in Rakona A.S.in the Czech Republic on January 1, 2010, when the exchange rate for the Czech koruna (Kc s) was $0.05.Rakona's financial statements as of December 31, 2011, two years later, follow:
Additional Information
• The January 1, 2011, beginning inventory of Kc s 6,000,000 was acquired on December 18, 2010, when the exchange rate was $0.043.Purchases of inventory were acquired uniformly during 2011.The December 31, 2011, ending inventory of Kc s 8,500,000 was acquired in the latter part of 2011 when the exchange rate was $0.032.All fixed assets were on the books when the subsidiary was acquired except for Kc s 5,000,000 of equipment acquired on January 3, 2011, when the exchange rate was $0.036, and Kc s 12,000,000 in buildings acquired on March 5, 2011, when the exchange rate was $0.034.Straight-line depreciation is 10 years for equipment and 40 years for buildings.A full year's depreciation is taken in the year of acquisition.
• Dividends were declared and paid on December 15, 2011, when the exchange rate was $0.031.
• Other exchange rates for 1 Kc s follow:
January 1, 2011............................$0.040
Average 2011..............................0.035
December 31, 2011.........................0.030
Part I.Translate the Czech koruna financial statements at December 31, 2011, in the following three situations:
a.The Czech koruna is the functional currency.The December 31, 2010, U.S.dollar-translated balance sheet reported retained earnings of $22,500.The December 31, 2010, cumulative translation adjustment was negative $202,500 (debit balance).
b.The U.S.dollar is the functional currency.The December 31, 2010, Retained Earnings account in U.S.dollars (including a 2010 remeasurement gain) that appeared in Rakona's remeasured financial statements was $353,000.
c.The U.S.dollar is the functional currency.Rakona has no long-term debt.Instead, it has common stock of Kc s 20,000,000 and additional paid-in capital of Kc s 50,000,000.The December 31, 2010, U.S.dollar-translated balance sheet reported a negative balance in retained earnings of $147,000 (including a 2010 remeasurement loss).
Part II.Explain the positive or negative sign of the translation adjustment in Part I( a ) and explain why a remeasurement gain or loss exists in Parts I( b ) and I( c ).