Suppose the German subsidiary of a U.S.firm had current assets of €3 million,fixed assets of €6 million and current liabilities of €3 million both at the start and at the end of the year.There are no long-term liabilities.If the euro depreciated during that year from $.48 to $.38,the FASB-52 translation gain loss.to be included in the parent company's equity account is
A)0,since the current assets and current liabilities cancel
B)+$300,000
C)-$350,000
D)-$600,000

Question

Quizplus · Accepted Answer

The translation loss is calculated on the net asset position. Net assets = €3 million (current assets) + €6 million (fixed assets) - €3 million (current liabilities) = €6 million. The depreciation of the euro from $0.48 to $0.38 results in a loss of $0.10 per euro. Therefore, the translation loss is €6 million * $0.10 = $600,000.

Suppose the German Subsidiary of a U