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Translation Problems Noreen

This document contains three accounting problems involving foreign currency translation. Problem A involves calculating the cumulative translation adjustment and translation adjustment for the year for a foreign subsidiary. Problem B involves calculating the cumulative translation adjustment for a New Zealand subsidiary based on exchange rate information provided. Problem C involves calculating the other comprehensive income translation adjustment resulting from a loan taken out to hedge the parent company's net investment in a Taiwanese subsidiary, given exchange rate movements over the period.

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346 views2 pages

Translation Problems Noreen

This document contains three accounting problems involving foreign currency translation. Problem A involves calculating the cumulative translation adjustment and translation adjustment for the year for a foreign subsidiary. Problem B involves calculating the cumulative translation adjustment for a New Zealand subsidiary based on exchange rate information provided. Problem C involves calculating the other comprehensive income translation adjustment resulting from a loan taken out to hedge the parent company's net investment in a Taiwanese subsidiary, given exchange rate movements over the period.

Uploaded by

Adam Smith
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Prob A. The following data were taken from the trial balance on December 31, 2017 of Foreign Co.

, a subsidiary of
Philippine Co.
FC
Total Assets 21,750
Total Liabilities 11,500
Shareholders’ Equity
Ordinary shares 5,000
Retained earnings (January 1, 2017) 2,500
Sales 90,000
Cost of goods sold 80,000
Depreciation expense 1,500
Other operating expense 5,750

Additional Information:
a. The balance of the exchange differences on translating foreign operation account at December 31, 2016 was
P50,000 credit
b. The translated balance of retained earnings in Philippine peso at December 31, 2016 was P119,500
c. When Foreign Co. was incorporate, the exchange rate was 1FC=P67.20. No ordinary share changes had occurred
since then.
d. The following data were the exchange rates during the year:
January 1, 2017 1FC=P67.20
December 31, 2017 1FC=P67.60
Average for 2017 1FC=P67.50
1. What is the cumulative translation adjustment to be reported at December 31, 2017? 51,775 Credit
2. What is the translation adjustment for the year 2017? 1,775 Credit

Prob B. The following data are taken from the records of Elite Imports Company, a foreign subsidiary in New Zealand
NZ Dollar
Total Assets 12/31/17 146,000
Total Liabilities 12/31/17 45,000
Common Stock 12/31/17 60,000
Retained Earnings 01/01/17 29,000
Net Income 2017 15,000
Dividends Declared 12/31/17 3,000

Exchange rates:
Current rate P10
Historical Rate 11
Weighted Average Rate 12
The peso balance of retained earnings on December 31, 2016 is P325,000
What amount of cumulative translation adjustment (CTA) is reported in the consolidated statement of financial position
on December 31, 2017? 125,000 Debit

Prob C. GWA Corporation of Makati paid P1,128,750 for a 35% interest in KYJ Company of Taiwan on January 1, 2022,
when KYJ’s net assets totaled 375,000 NT Dollar and the exchange rate for NT Dollar was P8.60. A summary o changes in
KYJ’s net assets during 2022 is as follows:
NT Dollar Exchange rates
Net assets, January 1 375,000 P8.60
Net income for 2022 75,000 8.55
Dividends paid for 2022 25,000 8.54
GWA Corporation anticipated a strengthening of the Philippine peso against the NT Dollar during the last half of 2022,
and it borrowed 150,000 NT dollar from a Taiwanese bank for one year at 10% interest on July 1, 2022 to hedge its net
investment in KYJ.

The loan was made when the exchange rate for NT Dollar was P8.55. The loan was denominated in NT Dollar and the
current exchange rate at December 31, 2022 was P8.50.

What is the other comprehensive income-translation adjustment presented in equity in 2022 as a result of hedging?
6,587.50

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