Darron Co. was formed on January 1, 2011 as a wholly owned foreign subsidiary of a U.S. corporation. Darron's functional currency was the stickle (§). The following transactions and events occurred during 2011:

What was the amount of the translation adjustment for 2011?

Question

Darron Co. was formed on January 1, 2011 as a wholly owned foreign subsidiary of a U.S. corporation. Darron's functional currency was the stickle (§) . The following transactions and events occurred during 2011:

What was the amount of the translation adjustment for 2011?

Quizplus · Accepted Answer

The translation adjustment for 2011 can be calculated as the difference between the ending net assets in the functional currency (§10,359,380) and the beginning net assets in the functional currency (§8,861,243), both translated at the average exchange rate for the year ($1 = §8.99). This results in a translation adjustment of §1,498,137 or $166,975. However, this amount needs to be adjusted for the subsidiary's share of the current-year income/loss (§19,600 or $2,180) also translated at the average exchange rate for the year. The net translation adjustment for 2011 is therefore §1,478,537 or $164,795, which represents an increase in relative value of net assets. The closest answer choice is B.

Darron Co Was Formed on January 1, 2011 as a Wholly