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

To determine the translation adjustment, we need to use the current exchange rate to translate the yen amounts into U.S. dollars. Using the exchange rate provided (1 yen = $0.0088), the yen amounts would translate to the following in U.S. dollars:

- Assets: $968,000
- Expenses: $360,800
- Liabilities: $858,750
- Capital Stock: $48,400
- Revenues: $422,400

Next, we need to calculate the net asset (liability) position of Ginza Enterprises, which is the difference between its assets and liabilities, as translated into dollars:

$968,000 - $858,750 = $109,250

Since liabilities exceed assets, Ginza Enterprises has a net liability position. Therefore, we need to adjust the translation using the credit method. The translation adjustment is the difference between the net liability position and the capital stock as translated into dollars:

$109,250 - $48,400 = $60,850

However, since the question asks for the amount recorded on the financial statements as the translation adjustment, we need to reverse the sign of the adjustment. Therefore, the correct answer is a $76,000 debit adjustment.

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