A U.S. parent acquired a subsidiary in New Zealand on July 1, 2020, the beginning of its fiscal year. The subsidiary's functional currency is the U.S. dollar. Its July 1, 2020 and June 30, 2021 trial balances are as follows, in New Zealand dollars (NZ$):
$$\begin{array} { | l | r | r | }
\hline & { \begin{array} { c }
\text { July 1, 2020 } \
\text { Dr (Cr) }
\end{array} } & \begin{array} { c }
\text { Jun e 30, 2021 } \
\text { Dr (Cr) }
\end{array} \
\hline \text { Cash, receivables } & \text { NZ\$\$ } 300,000 & \text { NZ\$ } 430,000 \
\hline \text { Inventories, at cost } & 550,000 & 620,000 \
\hline \text { Plant \& equipment, net } & 1,800,000 & 1,950,000 \
\hline \text { Liabilities } & \{ 1,500,000 \} & \{ 1,300,000 \} \
\hline \text { Capital stock } & \{ 300,000 \} & \{ 300,000 \} \
\hline \text { Retained earnings, beginning } & \{ 850,000 \} & \{ 850,000 \} \
\hline \text { Sales revenue } & & \{ 5,500,000 \} \
\hline \text { Expenses } & & { 4,950,000 } \
\hline & \text { NZ\$ } \quad 0 & \text { NZ\$ }\quad 0 \
\hline
\end{array}$$ Exchange rates ($/NZ$) are:
$$\begin{array} { l r }
\text { July 1, 2020 } & \$ 0.74 \
\text { Average for fiscal } 2021 & 0.71 \
\text { June } 30,2021 & 0.64
\end{array}$$ Additional information:
1. Expenses include cost of goods sold of NZ$3,000,000 and depreciation of NZ$60,000.
2. Sales revenue, merchandise purchases, and out of pocket expenses were incurred evenly throughout the year.
3. Plant and equipment of NZ$210,000 was purchased in fiscal 2021 when the exchange rate was $0.68/NZ$. Depreciation of NZ$20,000 was taken on the new plant and equipment for fiscal 2021.
4. The ending inventory was purchased when the exchange rate was $0.65/NZ$.
Required
a. Calculate the remeasurement gain or loss for fiscal 2021.
b. Calculate the subsidiary's remeasured total expenses for fiscal 2021. Expenses consist of cost of goods sold, out of pocket expenses, and depreciation expense.
c. Prepare the subsidiary's remeasured trial balance at June 30, 2021.

Question

A U.S. parent acquired a subsidiary in New Zealand on July 1, 2020, the beginning of its fiscal year. The subsidiary's functional currency is the U.S. dollar. Its July 1, 2020 and June 30, 2021 trial balances are as follows, in New Zealand dollars (NZ$):
 $$\begin{array} { | l | r | r | } 
\hline & { \begin{array} { c } 
\text { July 1, 2020 } \
\text { Dr (Cr) }
\end{array} } & \begin{array} { c } 
\text { Jun e 30, 2021 } \
\text { Dr (Cr) }
\end{array} \
\hline \text { Cash, receivables } & \text { NZ\$\$ } 300,000 & \text { NZ\$ } 430,000 \
\hline \text { Inventories, at cost } & 550,000 & 620,000 \
\hline \text { Plant \& equipment, net } & 1,800,000 & 1,950,000 \
\hline \text { Liabilities } & \{ 1,500,000 \} & \{ 1,300,000 \} \
\hline \text { Capital stock } & \{ 300,000 \} & \{ 300,000 \} \
\hline \text { Retained earnings, beginning } & \{ 850,000 \} & \{ 850,000 \} \
\hline \text { Sales revenue } & & \{ 5,500,000 \} \
\hline \text { Expenses } & &  { 4,950,000 } \
\hline & \text { NZ\$ } \quad 0 & \text { NZ\$ }\quad 0 \
\hline
\end{array}$$  Exchange rates ($/NZ$) are:
 $$\begin{array} { l r } 
\text { July 1, 2020 } & \$ 0.74 \
\text { Average for fiscal } 2021 & 0.71 \
\text { June } 30,2021 & 0.64
\end{array}$$ Additional information:
1. Expenses include cost of goods sold of NZ$3,000,000 and depreciation of NZ$60,000.
2. Sales revenue, merchandise purchases, and out of pocket expenses were incurred evenly throughout the year.
3. Plant and equipment of NZ$210,000 was purchased in fiscal 2021 when the exchange rate was $0.68/NZ$. Depreciation of NZ$20,000 was taken on the new plant and equipment for fiscal 2021.
4. The ending inventory was purchased when the exchange rate was $0.65/NZ$.
Required
a. Calculate the remeasurement gain or loss for fiscal 2021.
b. Calculate the subsidiary's remeasured total expenses for fiscal 2021. Expenses consist of cost of goods sold, out of pocket expenses, and depreciation expense.
c. Prepare the subsidiary's remeasured trial balance at June 30, 2021.

Quizplus · Accepted Answer

The Answer of A U.S. parent acquired a subsidiary in New Zealand on July 1, 2020, the beginning of its fiscal year. The subsidiary's functional currency is the U.S. dollar. Its July 1, 2020 and June 30, 2021 trial balances are as follows, in New Zealand dollars (NZ$):
 $$\begin{array} { | l | r | r | } 
\hline & { \begin{array} { c } 
\text { July 1, 2020 } \
\text { Dr (Cr) }
\end{array} } & \begin{array} { c } 
\text { Jun e 30, 2021 } \
\text { Dr (Cr) }
\end{array} \
\hline \text { Cash, receivables } & \text { NZ\$\$ } 300,000 & \text { NZ\$ } 430,000 \
\hline \text { Inventories, at cost } & 550,000 & 620,000 \
\hline \text { Plant \& equipment, net } & 1,800,000 & 1,950,000 \
\hline \text { Liabilities } & \{ 1,500,000 \} & \{ 1,300,000 \} \
\hline \text { Capital stock } & \{ 300,000 \} & \{ 300,000 \} \
\hline \text { Retained earnings, beginning } & \{ 850,000 \} & \{ 850,000 \} \
\hline \text { Sales revenue } & & \{ 5,500,000 \} \
\hline \text { Expenses } & &  { 4,950,000 } \
\hline & \text { NZ\$ } \quad 0 & \text { NZ\$ }\quad 0 \
\hline
\end{array}$$  Exchange rates ($/NZ$) are:
 $$\begin{array} { l r } 
\text { July 1, 2020 } & \$ 0.74 \
\text { Average for fiscal } 2021 & 0.71 \
\text { June } 30,2021 & 0.64
\end{array}$$ Additional information:
1. Expenses include cost of goods sold of NZ$3,000,000 and depreciation of NZ$60,000.
2. Sales revenue, merchandise purchases, and out of pocket expenses were incurred evenly throughout the year.
3. Plant and equipment of NZ$210,000 was purchased in fiscal 2021 when the exchange rate was $0.68/NZ$. Depreciation of NZ$20,000 was taken on the new plant and equipment for fiscal 2021.
4. The ending inventory was purchased when the exchange rate was $0.65/NZ$.
Required
a. Calculate the remeasurement gain or loss for fiscal 2021.
b. Calculate the subsidiary's remeasured total expenses for fiscal 2021. Expenses consist of cost of goods sold, out of pocket expenses, and depreciation expense.
c. Prepare the subsidiary's remeasured trial balance at June 30, 2021.

A US Parent Acquired a Subsidiary in New Zealand on July