Ginza Enterprises,a subsidiary of Universal Enterprises based in Dallas,reported the following information at the end of its first year of operations (all in yen): assets--110,000,000; expenses--41,000,000; liabilities--97,500,000; capital stock--5,500,000; revenues--48,000,000.Relevant exchange rates are as follows:

As a result of the translation process,what amount is recorded on the financial statements as the translation adjustment?

Question

Ginza Enterprises,a subsidiary of Universal Enterprises based in Dallas,reported the following information at the end of its first year of operations (all in yen) : assets--110,000,000; expenses--41,000,000; liabilities--97,500,000; capital stock--5,500,000; revenues--48,000,000.Relevant exchange rates are as follows:

As a result of the translation process,what amount is recorded on the financial statements as the translation adjustment?

Quizplus · Accepted Answer

The translation adjustment is calculated by subtracting the total assets and liabilities translated at the current rate from the total assets and liabilities translated at the historical rate. In this case, the total assets translated at the current rate is 110,000,000 yen, and the total liabilities translated at the current rate is 97,500,000 yen. Therefore, the total net assets translated at the current rate is 12,500,000 yen. The total assets translated at the historical rate is 110,000,000 yen, and the total liabilities translated at the historical rate is 97,500,000 yen. Therefore, the total net assets translated at the historical rate is 12,500,000 yen. The translation adjustment is the difference between the two, which is zero. However, the revenues and expenses are translated at the average rate, which is 0.0086. Therefore, the revenues and expenses are translated at 408,000,000 yen and 352,600,000 yen, respectively. The resulting net income is 55,400,000 yen, which is then translated at the current rate to 604,040 USD. The translation adjustment is the difference between the total net assets translated at the current rate (12,500,000 yen or 135,500 USD) and the net income translated at the current rate (604,040 USD), which is a debit adjustment of 76,040 USD (or 7,036,400 yen).

Ginza Enterprises,a Subsidiary of Universal Enterprises Based in Dallas,reported the Following