Rolfe Company a USbased company has a subsidiary in Nigeria

Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2016, the subsidiary had the following balance sheet (amounts are in thousands (000\'s)):

The subsidiary acquired the inventory on August 1, 2016, and the land and building in 2010. It issued the common stock in 2008. During 2017, the following transactions took place:

The U.S dollar ($) exchange rates for 1 NGN are as follows:

Assuming the NGN is the subsidiary\'s functional currency, what is the translation adjustment determined solely for 2017?

Assuming the U.S.$ is the subsidiary\'s functional currency, what is the remeasurement gain or loss determined solely for 2017?

(Input all amounts as positive. Enter amounts in whole dollars.)

Cash	NGN	15,340		Notes payable	NGN	20,120
Inventory		10,600		Common stock		20,120
Land		4,060		Retained earnings		10,060
Building		40,600
Accumulated depreciation		(20,300	)
	NGN	50,300			NGN	50,300

Solution

a.Compute translation adjustment Amount in 000 Local Currency NGN Exchange Rate US $ Amount in $ Net asset balance 1/1(total assets - notes payable) 30,180 0.007 $211.26 Increases in net assets (income) Sold inventory at a profit 5/1 (NGN 16,600 - 10,600) 6,000 0.0074 $44.4 Sold land at a gain 6/1 (NGN (6060 -$4060) 2,000 0.0076 $15.2 Decreases in net assets Paid a dividend 12/1 -3060 0.0088 -$26.93 Depreciation recorded -2030 0.0086 -$17.46 Net asset balance 12/31 $33,090 $226.47 Net asset balance 12/31 at current exchange rate $33,090 0.0096 -$317.66 Translation adjustment - positive -$91.19 Translation adjustment has impact on net assets due Changes in functional currency. -$91.19 Translation adjustment —positive -$91.19 b. Compute remeasurement gain/loss Local Currency KM Exchange Rate US $ Amount in $ Beginning net monetary liability position (purchase of land on account) (3060 - 2000) -1060 0.007 -$7.42 Increases in monetary assets: Sold inventory 5/1 16600 0.0074 $122.84 Sold land 6/1 6060 0.0076 $46.06 Decreases in monetary assets: Bought inventory 10/1 -20060 0.0084 -$168.5 Bought land 11/1 -3060 0.0086 -$26.32 Paid a dividend 12/1 -3060 0.0088 -$26.93 Ending net monetary liability position -4580 $60.27 Ending net monetary liability position at current exchange rate -4580 0.0096 $43.97 Remeasurement Loss $16.3 Remeasurement Gain/loss has impact on net monetary assets and liabilities due Changes in functional currency. $16.3 Payment on the note payable and collection of accounts receivable do not affect the net monetary liability position The purchase of land on account did not result in a decrease in monetary assets, rather an increase in monetary liabilities.