Answers to Problems

1. C
2. C
3. C
4. B Because the peso is the functional currency, the financial statements must
be translated using the current rate method. Therefore, answers a and d
can be eliminated. Because the subsidiary has a net asset position and the
peso has appreciated from $.16 to $.19, a positive translation adjustment
will result.
5. A All asset accounts are translated at current rates.
6. A Because the foreign currency is the functional currency, a translation is
required. All assets accounts are translated at current rates.
7. C Because the U.S. dollar is the functional currency, a remeasurement is
required. All receivables are remeasured at current rates. Assets carried at
historical cost, such as prepaid insurance and goodwill, are remeasured at
historical rates.
8. B The foreign currency is the functional currency, so a translation is
appropriate. All assets (including inventory) are translated at the current
exchange rate [100,000 x $.17].
9. C Cost of goods sold is translated at the exchange rate in effect at the date
of accounting recognition, which is the date the goods were sold [100,000
x $.18].
10. D The foreign currency is the functional currency, so a translation is
appropriate. All assets are translated at the current exchange rate of $.19.
11. C The U.S. dollar is the functional currency, so a remeasurement is
appropriate. Inventory (carried at cost) is remeasured at the historical
exchange rate of $.16. Marketable equity securities (carried at market
value) are remeasured at the current exchange rate of $.19.
12. C Beginning inventory FCU 200,000 x $1.00 = $ 200,000
Purchases 10,300,000 x $0.80 = 8,240,000
Ending inventory (500,000) x $0.75 = (375,000)
Cost of goods sold FCU 10,000,000 $8,065,000

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10-8 Solutions Manual
13. C Beginning net assets, 1/1………….. P20,000 x $.15 = $ 3,000
Increase in net assets:
Income......................................... 10,000 x $.19 = 1,900
Ending net assets, 12/31................. P30,000 $ 4,900
Ending net assets at
current exchange rate................ P30,000 x $.21 = $ 6,300
Translation Adjustment (positive) . $(1,400)
14. C By translating items carried at historical cost by the historical exchange
rate, the temporal method maintains the underlying valuation method used
by the foreign subsidiary.
15. A Beginning net monetary assets, 1/1 P100,000 x $.16 = $16,000
Increases in net monetary assets:
Sale of inventory......................... 50,000 x $.20 = 10,000
Decreases in net monetary assets:
Purchase of equipment.............. (60,000) x $.16 = (9,600)
Purchase of inventory................ (30,000) x $.18 = (5,400)
Transfer to parent....................... (10,000) x $.21 = (2,100)
Ending net monetary assets, 12/31 P 50,000 $ 8,900
Ending net monetary assets at
the current exchange rate.......... P 50,000 x $.22 = (11,000)
Remeasurement gain....................... $(2,100)
16. C Marketable equity securities are carried at market value and therefore
translated at the current exchange rate under the temporal method.
17. B When the U.S. dollar is the functional currency, SFAS 52 requires
remeasurement using the temporal method with remeasurement gains and
losses reported in income.
18. B Wages payable is translated at the current exchange rate.
19. C Gains and losses on hedges of net investments (whether through a forward
contract, borrowing, or other technique) are offset against the translation
adjustment being hedged.
20. D Remeasurement gains are reported in the income statement as a part of
income from continuing operations.
21. (10 minutes) (Specify appropriate rates for a translation)
Rent expense—use actual (historical) rate at time of recording. Rent
expense would often be recorded evenly throughout the year so that an
average rate for the period is acceptable.
Dividends paid—use historical rate at time of recording, the date of
declaration.
Equipment—as an asset, use current rate at the balance sheet date.
Notes payable—as a liability, use current rate at the balance sheet date.
21. (continued)
Sales—use actual (historical) rate at time of recording. Sales often occur
evenly throughout the year so that an average rate is acceptable. However,
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Hoyle, Schaefer, Doupnik, Advanced Accounting, 9/e 10-9
 if sales are more prevalent at a particular time during the year, historical
rates should be used.
Depreciation expense—use historic rate at time of recording. In most cases,
average rate for the year is acceptable, because depreciation occurs evenly
throughout the year. Depreciation is recorded at year-end only as a matter
of convenience.
Cash—as an asset, use the current rate at the balance sheet date.
Accumulated depreciation—as a contra-asset account, use the current ex-
change rate at the balance sheet date.
Common stock—as an equity account, use historic rate at time of recording,
the date of issuance.
22. (5 minutes) (Determine translated values)
As a translation, both the asset (inventory) and the liability (accounts
payable) utilize the current exchange rate at the balance sheet date
(December 31). Thus, the translated values are as follows:
Inventory LCU120,000 x 25% left = LCU30,000 x 1/3.0 = $10,000
Accounts payable LCU120,000 x 40% unpaid = LCU48,000 x 1/3.0 = $16,000
23. (10 minutes) (Determine translation and remeasurement rates)
Translation Remeasurement
Accounts payable $.16 C $.16 C
Accounts receivable $.16 C $.16 C
Accumulated depreciation $.16 C $.26 H
Advertising expense $.19 A $.19 A
Amortization expense $.19 A $.25 H
Buildings $.16 C $.26 H
Cash $.16 C $.16 C
Common stock $.28 H $.28 H
Depreciation expense $.19 A $.26 H
Dividends paid (10/1) $.20 H $.20 H
Notes payable $.16 C $.16 C
Patents (net) $.16 C $.25 H
Salary expense $.19 A $.19 A
Sales $.19 A $.19 A
* C = current rate, H = historical rate, A = average rate

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10-10 Solutions Manual
24. (20 minutes) (Calculate translation adjustment and remeasurement gain/loss
and explain their economic relevance)
The translation adjustment and remeasurement gain/loss can be determined
as the plug figure that keeps the dollar balance sheet in balance:
Translation Remeasurement
CHF Rate US$ Rate US$
Cash............................. 500,000 $.75 C 375,000 $.75 C 375,000
Inventory...................... 1,000,000 $.75 C 750,000 $.70 H 700,000
Fixed assets................ 3,000,000 $.75 C 2,250,000 $.70 H 2,100,000
Total assets............... 4,500,000 3,375,000 3,175,000
Notes payable.......... 800,000 $.75 C 600,000 $.75 C 600,000
Owners equity............. 3,700,000 $.70 H 2,590,000 $.70 H 2,590,000
Translation adjustment 185,000
Retained earnings
(remeasurement loss) (15,000)
Total .......................... 4,500,000 3,375,000 3,175,000
Alternatively, the translation adjustment and remeasurement loss can be
calculated by analyzing the subsidiary’s balance sheet exposure:
Translation
Beginning net assets, 12/1 CHF3,700,000 x $.70 = $2,590,000
Ending net assets, 12/31 at
current exchange rate CHF3,700,000 x $.75 = (2,775,000)
Translation adjustment (positive)
$( 185,000)
Remeasurement
Beginning net monetary
liability position, 12/1 CHF(300,000) x $.70 = $(210,000)
Ending net monetary liability
position, 12/31 at current
exchange rate CHF(300,000) x $.75 = (225,000)
Remeasurement loss $ 15,000

Economic Relevance of Translation Adjustment

The translation adjustment increases stockholders’ equity by $185,000. The
positive translation adjustment arises because the Swiss subsidiary has a net asset
position of CHF3,700,000 and the Swiss franc appreciates by $.05 [CHF3,700,000 x
$.05 = $185,000]. The positive translation adjustment is not realized in terms of
dollar cash flow. It would be a realized gain only if Stephanie sold this operation on
December 31 for exactly CHF3,700,000 and converted the sales proceeds into
dollars at the current exchange rate of $.75 per Swiss franc.
Economic Relevance of Remeasurement Loss
The remeasurement loss arises because the Swiss subsidiary has a net monetary
liability position of CHF300,000 (Cash of CHF500,000 less Notes payable of
CHF800,000) and the Swiss franc has appreciated by $.05 [CHF300,000 x $.05 =
$15,000]. The loss is unrealized. It would be realized only if the Swiss subsidiary
converted its Swiss franc cash into dollars at December 31, thereby realizing a
transaction gain of $25,000 [CHF500,000 x ($.75-$.70)], and the parent paid off the
Swiss franc note payable using U.S. dollars, thereby realizing a transaction loss of
$40,000 [CHF800,000 x ($.75-$.70)]. (The note could have been paid at December 18
for $560,000 [CHF800,000 x $.70]. At December 31, it takes $600,000 to pay off the
note [CHF800,000 x $.75].)

25. (30 minutes) (Prepare financial statements for a foreign subsidiary and then
translate them into U.S. dollars)
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Hoyle, Schaefer, Doupnik, Advanced Accounting, 9/e 10-11
 Fenwicke Company Subsidiary
Income Statement
LCU U.S. Dollars
Rent revenue 60,000 x $1.90 A = $114,000
Interest expense (10,000) x $1.90 A = (19,000)
Depreciation expense (14,000) x $1.90 A = (26,600)
Repair expense (4,000) x $1.85*H = (7,400)
Net income 32,000 $ 61,000
* Repair expense is the only expense not incurred evenly throughout the
year.
Statement of Retained Earnings
LCU U.S. Dollars

Retained earnings, 1/1 -0- -0-

Net income 32,000 (above) $61,000
Dividends paid (5,000) x $1.80 H = (9,000)
Retained earnings, 12/31 27,000 $52,000
Balance Sheet
LCU U.S. Dollars
Cash 41,000 x $1.80 C = $ 73,800
Accounts receivable 10,000 x $1.80 C = 18,000
Building 140,000 x $1.80 C = 252,000
Accumulated depreciation (14,000) x $1.80 C = (25,200)
Total assets 177,000 $318,600
Interest payable 10,000 x $1.80 C = $ 18,000
Note payable 100,000 x $1.80 C = 180,000
Common stock 40,000 x $2.00 H = 80,000
Retained earnings 27,000 (above) 52,000
Translation adjustment (below) (11,400)
Total liabilities and equities177,000 $318,600
Computation of Translation Adjustment
Beginning net assets -0- -0-
Increase in net assets:
Issued common stock 40,000 x $2.00 = $ 80,000
Net income 32,000 (above) 61,000
Decrease in net assets:
Dividends paid (5,000) x $1.80 = (9,000)
Ending net assets 67,000 $132,000
Ending net assets at current
exchange rate 67,000 x $1.80 = 120,600
Translation adjustment (negative) $ 11,400

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2009

10-12 Solutions Manual
26. (30 minutes) (Prepare a statement of cash flows for a foreign subsidiary and
then translate it into U.S. dollars)
Fenwicke Company Subsidiary
Statement of Cash Flows
LCU U.S. Dollars
Operating Activities:
Net income 32,000 (from prob 25)
plus: depreciation 14,000 x $1.9 A = 26,600
less: increase in accounts receivable (10,000) x $1.9 A = (19,000)
plus: increase in interest payable 10,000 x $1.9 A = 19,000
Cash flow from operations 46,000 87,600
Investing Activities:
Purchase of building (140,000) x $2.0 H = (280,000)
Financing Activities:
Sale of common stock 40,000 x $2.0 H = 80,000
Borrowing on note 100,000 x $2.0 H = 200,000
Dividends paid (5,000) x $1.8 H = (9,000)

135,000 271,000
Increase in cash 41,000 78,600
Effect of exchange rate change on cash (4,800)
Cash, 1/1 -0- -0-
Cash, 12/31 41,000 x $1.80 C = $ 73,800

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Hoyle, Schaefer, Doupnik, Advanced Accounting, 9/e 10-13
27. (25 minutes) (Compute translation adjustment and remeasurement gain or
loss)
a. Translation—only changes in net assets have an impact on the computation
of the translation adjustment.
Net asset balance 1/1 KM30,000 x $.32 = $ 9,600
Increases in net assets (income):
Sold inventory at a profit 5/1 5,000 x $.34 = 1,700
Sold land at a gain 6/1 1,000 x $.35 = 350
Decreases in net assets:
Paid a dividend 12/1 (3,000) x $.41 = (1,230)
Depreciation recorded (2,000) x $.37 = ( 740)
Net asset balance 12/31 KM31,000 $ 9,680
Net asset balance 12/31
at current exchange rate KM31,000 x $.42 = (13,020)
Translation adjustment—positive $(3,340)
b. Remeasurement—only changes in net monetary assets and liabilities have an
impact on the computation of the remeasurement gain.
Beginning net monetary
liability position KM (3,000) x $.32 = $ ( 960)
Increases in monetary assets:
Sold inventory 5/1 15,000 x $.34 = 5,100
Sold land 6/1 5,000 x $.35 = 1,750
Decreases in monetary assets:
Bought inventory 10/1 (12,000) x $.39 = (4,680)
Bought land 11/1 (4,000) x $.40 = (1,600)
Paid a dividend 12/1 (3,000) x $.41 = (1,230)
Ending net monetary liability
position KM(2,000) $(1,620)
Ending net monetary liability position
at current exchange rate KM(2,000) x $.42 = (840)
Remeasurement gain $ (780)
Note: The purchase of land on account did not result in a decrease in
monetary assets, rather an increase in monetary liabilities. Payment on the
note payable and collection of accounts receivable do not affect the net
monetary liability position.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2009

10-14 Solutions Manual
28. (20 minutes) (Compute translation adjustment and remeasurement gain or
loss)
a. The translation adjustment is based on changes in the net assets of the
subsidiary.
Net assets, 1/1 82,000 LCU x $.24 = $19,680
Changes in net assets
Rendered services 30,000 LCU x $.25 = 7,500
Incurred expense (18,000) LCU x $.26 = (4,680)
Net assets, 12/31 94,000 LCU 22,500
Net assets, 12/31 at
current exchange rate 94,000 LCU x $.29 = 27,260
Translation adjustment (positive) $(4,760)
b. The remeasurement gain or loss is based on changes in the net monetary
assets of the subsidiary.
Net monetary assets, 1/1 22,000 LCU x $.24 = $ 5,280
Changes in net monetary assets
Rendered services 30,000 LCU x $.25 = 7,500
Incurred expense (18,000) LCU x $.26 = (4,680)
Net monetary assets, 12/31 34,000 LCU $ 8,100
Net monetary assets, 12/31 at
current exchange rate 34,000 LCU x $.29 = 9,860
Remeasurement gain $(1,760)
c. Translated value of land 60,000 LCU x $.29 = $17,400
Remeasured value of land 60,000 LCU x $.23 = $13,800
29. (10 minutes) (Determine the appropriate exchange rate)
Account (a) Translation (b) Remeasurement
Sales 20 A 20 A
Inventory 22 C 19 H
Equipment 22 C 13 H
Rent expense 20 A 20 A
Dividends 21 H 21 H
Notes receivable 22 C 22 C
Accumulated depreciation--equipment 22 C 13 H
Salary payable 22 C 22 C
Depreciation expense 20 A 13 H
C = current exchange rate, A = average exchange rate, H = Historical
exchange rate

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Hoyle, Schaefer, Doupnik, Advanced Accounting, 9/e 10-15
30. (30 minutes) (Hedge of balance sheet exposure)
a. Net assets, 1/1 (132,000 – 54,000) 78,000 kites x $0.80 = $62,400
Change in net assets:
Net income 26,000 kites x $0.77 = 20,020
Dividends, 3/1 (5,000) kites x $0.78 = (3,900)
Dividends, 10/1 (5,000) kites x $0.76 = (3,800)
Net assets, 12/31 94,000 kites $74,720
Net assets at current
exchange rate, 12/31 94,000 kites x $0.75 = 70,500
Translation adjustment (negative) $ 4,220
b. Forward contract journal entries
10/1 No entry
12/31 Forward Contract................................... 2,000
Translation Adjustment (positive). . 2,000
(To record the change in the value of the forward contract as
an adjustment to the translation adjustment)
Foreign Currency (kites)....................... 150,000
Cash................................................... 150,000
(To record the purchase of 200,000 kites at the spot rate of
$.75)
Cash ...................................................... 152,000

Foreign Currency (kites).................. 150,000

Forward Contract............................. 2,000
(To record delivery of 200,000 kites, receipt of $152,000, and
close the forward contract account.)
c. The net negative translation adjustment (debit balance) to be reported in
other comprehensive income at 12/31 is $2,220 ($4,220 – $2,000).

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2009

10-16 Solutions Manual
31. (45 minutes) (Translation and remeasurement of foreign subsidiary trial
balance)
a. Translation of Subsidiary Trial Balance
Debits Credits
Cash…………………………………. 8,000 KQ x 1.62 $12,960
Accounts Receivable…………….. 9,000 KQ x 1.62 14,580
Equipment………………………….. 3,000 KQ x 1.62 4,860
Accumulated Depreciation……… 600 KQ x 1.62 $ 972
Land………………………………… 5,000 KQ x 1.62 8,100
Accounts Payable………………… 3,000 KQ x 1.62 4,860
Notes Payable…………………….. 5,000 KQ x 1.62 8,100
Common Stock…………………… 10,000 KQ x 1.71 17,100
Dividends Paid……………………. 4,000 KQ x 1.66 6,640
Sales………………………………… 25,000 KQ x 1.64 41,000
Salary Expense…………………… 5,000 KQ x 1.64 8,200
Depreciation Expense…………… 600 KQ x 1.64 984
Miscellaneous Expense…………. 9,000 KQ x 1.64 14,760
$71,084
Translation Adjustment (negative) 948
$72,032 $72,032
Calculation of Translation Adjustment
Net assets, 1/1………………………….. -0- -0-
Increase in net assets:
Common stock issued………………. 10,000 KQ x 1.71 $17,100
Sales……………………………………. 25,000 KQ x 1.64 41,000
Decrease in net assets:
Dividends paid……………………….. ( 4,000) KQ x 1.66 (6,640)
Salary expense……………………….. ( 5,000) KQ x 1.64 (8,200)
Depreciation expense………………. ( 600) KQ x 1.64 ( 984)
Miscellaneous expense ……………. ( 9,000) KQ x 1.64 (14,760)
Net assets, 12/31………………………. 16,400* KQ $27,516
Net assets, 12/31 at
current exchange rate……………. 16,400 KQ x 1.62 26,568
Translation adjustment (negative) $ 948
* This amount can be verified as ending assets (24,400 KQ) minus ending
liabilities (8,000 KQ) – net assets, 12/31 = 16,400 KQ.

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Hoyle, Schaefer, Doupnik, Advanced Accounting, 9/e 10-17
31. (continued)
b. Remeasurement of Subsidiary Trial Balance
Debits Credits
Cash 8,000 KQ x 1.62 $12,960
Accounts Receivable 9,000 KQ x 1.62 14,580
Equipment 3,000 KQ x 1.71 5,130
Accumulated Depreciation 600 KQ x 1.71 $ 1,026
Land 5,000 KQ x 1.59 7,950
Accounts Payable 3,000 KQ x 1.62 4,860
Notes Payable 5,000 KQ x 1.62 8,100
Common Stock 10,000 KQ x 1.71 17,100
Dividends Paid 4,000 KQ x 1.66 6,640
Sales 25,000 KQ x 1.64 41,000
Salary Expense 5,000 KQ x 1.64 8,200
Depreciation Expense 600 KQ x 1.71 1,026
Miscellaneous Expense 9,000 KQ x 1.64 14,760
$71,246
Remeasurement loss (debit) 840
$72,086 $72,086
Calculation of Remeasurement Loss
Net monetary assets, 1/1 -0- -0-
Increase in net monetary assets:
Common stock issued 10,000 KQ x 1.71 $17,100
Sales 25,000 KQ x 1.64 41,000
Decrease in net monetary assets:
Acquired equipment (3,000) KQ x 1.71 (5,130)
Acquired land (5,000) KQ x 1.59
(7,950)
Dividends paid (4,000) KQ x 1.66
(6,640)
Salary expense (5,000) KQ x 1.64
(8,200)
Miscellaneous expense (9,000) KQ x 1.64 (14,760)
Net monetary assets, 12/31 9,000* KQ $15,420
Net monetary assets, 12/31
at current exchange rate 9,000 KQ x 1.62 14,580
Remeasurement loss (debit) $ 840
* This amount can be verified as ending monetary assets (Cash +
Accounts receivable) minus ending monetary liabilities (Accounts
payable + Notes payable): 17,000 KQ – 8,000 KQ = 9,000 KQ.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2009

10-18 Solutions Manual
32. (30 minutes) (Translate the financial statements of a foreign subsidiary)
LIVINGSTON COMPANY
Income Statement
For Year Ending December 31, 2009
Goghs U.S. Dollars
Sales 270,000 x 1/.63 = 428,571
Cost of Goods Sold (155,000) x 1/.63 = (246,032)
Gross Profit 115,000 182,539
Operating Expenses (54,000) x 1/.63 = (85,714)
Gain on Sale of Equipment 10,000 x 1/.58 = 17,241
Net Income 71,000 114,066
Statement of Retained Earnings
For Year Ending December 31, 2009
Goghs U.S. Dollars
Retained Earnings, 1/1/09 216,000 given 395,000
Net Income 71,000 above 114,066
Dividends Paid (26,000) x 1/.62 = (41,935)
Retained Earnings, 12/31/09 261,000 467,131

Balance Sheet
December 31, 2009
Goghs U.S. Dollars
Cash 44,000 x 1/.65 = 67,692
Receivables 116,000 x 1/.65 = 178,462
Inventory 58,000 x 1/.65 = 89,231
Fixed Assets (net) 339,000 x 1/.65 = 521,538
Total 557,000 856,923
Liabilities 176,000 x 1/.65 = 270,769
Common Stock 120,000 x 1/.48 = 250,000
Retained Earnings 261,000 above 467,131
Translation Adjustment (130,977)
Total 557,000 856,923
Translation Adjustment Goghs U.S. Dollars
Net assets, 1/1/09 336,000 x 1/.60 = 560,000
Net income, 2009 71,000 above 114,066
Dividends paid (26,000) above (41,935)
Net assets, 12/31/09 381,000 632,131
Net assets at current exchange rate,
12/31/09 381,000 x 1/.65 = 586,154
Translation adjustment, 2009 (negative) 45,977
Cumulative translation adjustment, 1/1/09 (negative) 85,000
Cumulative translation adjustment, 12/31/09 (negative) 130,977

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Hoyle, Schaefer, Doupnik, Advanced Accounting, 9/e 10-19
33. (35 minutes) (Compute translation adjustment and remeasurement gain or
loss)
a. Remeasurement Gain or Loss
Net monetary assets, 1/1/09* 2,000 KR x 2.50 = $ 5,000
Increases in net monetary assets:
Issued Common Stock (4/1/09) 10,000 KR x 2.60 = 26,000
Sold Building** (7/1/09) 22,000 KR x 2.80 = 61,600
Sales (2009) 80,000 KR x 2.70 = 216,000
Decreases in net monetary assets:
Purchased Equipment (4/1/09) (30,000) KR x 2.60 = (78,000)
Paid Dividends (10/1/09) (32,000) KR x 2.90 = (92,800)
Rent Expense (2009) (14,000) KR x 2.70 = (37,800)
Salary Expense (2009) (20,000) KR x 2.70 = (54,000)
Utilities Expense (2009) ( 5,000) KR x 2.70 = (13,500)
Net monetary assets, 12/31/09 13,000 KR $ 32,500
Net monetary assets, 12/31/09 at
current exchange rate 13,000 KR x 3.00 = 39,000
Remeasurement gain (credit) $ (6,500)
* Net monetary assets: (Cash + Accounts Receivable) - (Account Payable +
Bonds Payable)
** To determine cash proceeds from the sale of the building, changes in the
Accumulated Depreciation and Buildings accounts must be analyzed
along with Depreciation Expense and Gain on Sale of Building.
Depreciation expense is KR 15,000; KR 5,000 is attributable to equipment
(Accumulated Depreciation—Equipment increases by KR 5,000), KR
10,000 is depreciation of buildings. Accumulated Depreciation—
Buildings increases by only KR 5,000 during 2009, therefore, the
accumulated depreciation related to the building sold during 2009 is KR
5,000. The Buildings account is decreased by KR 21,000, thus the book
value of the building sold must have been KR 16,000 (as given). The Gain
on Sale of Building is KR 6,000; therefore, cash proceeds from the sale
are KR 22,000.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2009

10-20 Solutions Manual
33. (continued)
b. Translation Adjustment

Net assets, 1/1/09* 100,000 KR x 2.50 = $250,000

Increases in net assets
Issued Common Stock (4/1/09) 10,000 KR x 2.60 = 26,000
Gain on Sale of Building** (7/1/09) 6,000 KR x 2.80 = 16,800
Sales (2009) 80,000 KR x 2.70 = 216,000
Decreases in net assets
Paid Dividends (10/1/09) (32,000) KR x 2.90 = (92,800)
Depreciation Expense (2009) (15,000) KR x 2.70 = (40,500)
Rent Expense (2009) (14,000) KR x 2.70 = (37,800)
Salary Expense (2009) (20,000) KR x 2.70 = (54,000)
Utilities Expense (2009) ( 5,000) KR x 2.70 = (13,500)
Net assets, 12/31/09 110,000 KR $270,200
Net monetary assets, 12/31/09 at
current exchange rate 110,000 KR x 3.00
330,000
Translation adjustment (positive) $(59,800)
* Net assets: Common stock + Retained earnings
** Selling a building at a gain of KR 6,000 increases net assets by that
amount.
Although not required by Part b, the beginning translation adjustment as of
January 1, 2009 can be computed by translating the January 1 accounts and
assuming that the translation adjustment is the balancing figure:
Common Stock, 1/1/09 70,000 KR x 2.40 = $168,000
Retained Earnings, 1/1/09 30,000 KR given 62,319
Net assets, 1/1/09 100,000 KR $230,319
Net assets, 1/1/09 at current
exchange rate 100,000 KR x 2.50 = 250,000
Cumulative translation adjustment (positive), 1/1/09 $ (19,681)
Translation adjustment (positive), 2009 (59,800)
Cumulative translation adjustment (positive), 12/31/09 $ (79,481)

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Hoyle, Schaefer, Doupnik, Advanced Accounting, 9/e 10-21
34. (90 minutes) (Remeasure non-functional currency accounts into foreign
functional currency and then translate foreign functional currency financial
statements into U.S. dollars)
a. Remeasurement of Mexican Operations
Canadian
Dollars
Pesos Debit Credit
Accounts payable 49,000 x .35 C 17,150
Accumulated depreciation 19,000 x .25 H 4,750
Building and equipment 40,000 x .25 H 10,000
Cash 59,000 x .35 C 20,650
Depreciation expense 2,000 x .25 H 500
Inventory (beginning
—income statement) 23,000 x .30 A (’08) 6,900
Inventory (ending
—income statement) 28,000 x .34 A(’09) 9,520
Inventory (ending—balance sheet) 28,000 x .34 A(’09) 9,520
Purchases 68,000 x .34 A(’09) 23,120
Receivables 21,000 x .35 C 7,350
Salary expense 9,000 x .34 A 3,060
Sales 124,000 x .34 A 42,160
Main office 30,000 given 7,530
Remeasurement loss Schedule One 10
Total 81,110 81,110

Canadian
Schedule One—Remeasurement Loss Pesos Dollars
Net monetary liabilities, 1/1/09* (16,000) x .32 (5,120)
Increases in net monetary assets
Sales 124,000 x .34 42,160
Decreases in net monetary assets
Purchases (68,000) x .34 (23,120)
Salary Expense ( 9,000) x .34 ( 3,060)
Net monetary assets, 12/31/09** 31,000 10,860
Net monetary assets, 12/31/09 at
current exchange rate 31,000 x .35 10,850
Remeasurement loss 10

* Net monetary liabilities, 1/1/09, can be determined by first determining the

net monetary assets at 12/31/09 and then backing out the changes in
monetary assets and liabilities during 2009—sales, purchases, and salary
expense.
** Net monetary assets, 12/31/09: Cash + Receivables – Accounts Payable

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10-22 Solutions Manual
34. (continued)
b. The following C$ financial statements are produced by combining the
figures from the main operation with the remeasured figures from the
branch operation. The Branch Operation and Main Office accounts offset
each other. Cost of goods sold for the Mexican branch is determined by
combining beginning inventory, purchases, and ending inventory as
remeasured in C$.
Income Statement c. Translation into U.S. dollars—
For the Year Ended December 31, 2009 Current Rate Method
Sales C$ 354,160 x .67 A = $ 237,287.20
Cost of goods sold (223,500) x .67 A = (149,745.00)
Gross profit 130,660 87,542.20
Depreciation expense (8,500) x .67 A = (5,695.00)
Salary expense (29,060) x .67 A = (19,470.20)
Utility expense (9,000) x .67 A = (6,030.00)
Gain on sale of equipment 5,000 x .68 H = 3,400.00
Remeasurement loss (10) x .67 A = (6 .70)

Net income C$ 89,090 $ 59,740.30

Statement of Retained Earnings
For the Year Ended December 31, 2009
Retained earnings, 1/1/09 C$ 135,530 Given $ 70,421.00
Net income (above) 89,090 Above 59,740.30
Dividends paid ( 28,000) x .69 H = (19,320.00)
Retained earnings, 12/31/09 C$ 196,620 $110,841.30

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Hoyle, Schaefer, Doupnik, Advanced Accounting, 9/e 10-23
34. (continued)
Balance Sheet
December 31, 2009
Cash C$ 46,650 x .65 C = $ 30,322.50
Receivables 75,350 x .65 C = 48,977.50
Inventory 107,520 x .65 C = 69,888.00
Buildings and equipment 177,000 x .65 C = 115,050.00
Accumulated depreciation (31,750) x .65 C = (20,637.50)
Total C$ 374,770 $243,600.50
Accounts payable C$ 52,150 x .65 C = $ 33,897.50
Notes payable 76,000 x .65 C = 49,400.00
Common stock 50,000 x .45 H = 22,500.00
Retained earnings 196,620 Above 110,841.30
Cumulative translation adjustment Schedule Two 26,961.70
Total C$ 374,770 $ 243,600.50
Schedule Two—Translation Adjustment
Net assets, 1/1/09 C$ 185,530 x .70 = $129,871.00
Changes in net assets
Net income 89,090 Above 59,740.30
Dividends (28,000) x .69 = (19,320.00)
Net assets, 12/31/09 C$ 246,620 $170,291.30
Net assets, 12/31/09 at
current exchange rate C$ 246,620 x .65 = 160,303.00
Translation adjustment, 2009 (negative) $ 9,988.30
Cumulative translation adjustment, 1/1/09 (positive) (36,950.00)
Cumulative translation adjustment, 12/31/09 (positive) $(26,961.70)

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10-24 Solutions Manual