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

To determine the translation adjustment, we need to find the difference between Darron Co.'s net assets in stickles on December 31, 2011, and the net assets translated at the beginning of the year using the beginning of the year exchange rate.

Beginning of the year net assets = §2,800,000
Ending net assets = §3,400,000

Translation adjustment = §3,400,000 - §2,800,000 = §600,000

To find the translation adjustment in USD, we need to convert the §600,000 using the exchange rate at the end of the year.

Exchange rate at the end of the year = 0.5034 USD/§

Translation adjustment in USD = §600,000 x 0.5034 USD/§ = $302,040

Therefore, the answer is B, $302,137 increase in relative value of net assets.

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