DeGaulle Enterprises,a subsidiary of Clinton Company based in New York,reported the following information at the end of its first year of operations (all in French francs): assets--4,790,000;expenses--6,500,000;liabilities--2,950,000;capital stock--1,200,000,revenues--7,140,000.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

DeGaulle Enterprises,a subsidiary of Clinton Company based in New York,reported the following information at the end of its first year of operations (all in French francs): assets--4,790,000;expenses--6,500,000;liabilities--2,950,000;capital stock--1,200,000,revenues--7,140,000.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 calculate the translation adjustment, we need to first convert all the amounts from French francs to US dollars using the given exchange rate ($1 = 6.5 FF).

Assets: $4,790,000 / 6.5 = $736,923.08
Expenses: $6,500,000 / 6.5 = $1,000,000
Liabilities: $2,950,000 / 6.5 = $453,846.15
Capital stock: $1,200,000 / 6.5 = $184,615.38
Revenues: $7,140,000 / 6.5 = $1,098,461.54

Next, we need to calculate the total equity of the subsidiary in US dollars:

Total equity = Assets - Liabilities
Total equity = $736,923.08 + $184,615.38 - $453,846.15
Total equity = $467,692.31

Now we can calculate the translation adjustment:

Translation adjustment = Ending equity - Beginning equity
Translation adjustment = $467,692.31 - $461,612.50
Translation adjustment = $6,079.81

Since the subsidiary's equity increased by $6,079.81 as a result of the currency translation, we need to record this amount as a debit adjustment on the financial statements. Therefore, the answer is C) $6,080 debit adjustment (rounded up to the nearest dollar).

DeGaulle Enterprises,a Subsidiary of Clinton Company Based in New York,reported