Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2019, the subsidiary had the following balance sheet (amounts are in thousands [000s]): Cash NGN 15,120 Notes payable NGN 20,160 Inventory 10,800 Common stock 20,160 Land 4,080 Retained earnings 10,080 Building 40,800 Accumulated depreciation (20,400 ) NGN 50,400 NGN 50,400 The subsidiary acquired the inventory on August 1, 2019, and the land and building in 2013. It issued the common stock in 2011. During 2020, the following transactions took place: 2020 Feb. 1 Paid 8,080,000 NGN on the note payable. May 1 Sold entire inventory for 16,800,000 NGN on account. June 1 Sold land for 6,080,000 NGN cash. Aug. 1 Collected all accounts receivable. Sept. 1 Signed long-term note to receive 8,080,000 NGN cash. Oct. 1 Bought inventory for 20,080,000 NGN cash. Nov. 1 Bought land for 3,080,000 NGN on account. Dec. 1 Declared and paid 3,080,000 NGN cash dividend to parent. Dec. 31 Recorded depreciation for the entire year of 2,040,000 NGN. The U.S dollar ($) exchange rates for 1 NGN are as follows: 2011 NGN 1 = $ 0.0056 2013 1 = 0.0050 August 1, 2019 1 = 0.0070 December 31, 2019 1 = 0.0072 February 1, 2020 1 = 0.0074 May 1, 2020 1 = 0.0076 June 1, 2020 1 = 0.0078 August 1, 2020 1 = 0.0082 September 1, 2020 1 = 0.0084 October 1, 2020 1 = 0.0086 November 1, 2020 1 = 0.0088 December 1, 2020 1 = 0.0090 December 31, 2020 1 = 0.0100 Average for 2020 1 = 0.0090 Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2020?
Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2019, the subsidiary had the following balance sheet (amounts are in thousands [000s]): Cash NGN 15,120 Notes payable NGN 20,160 Inventory 10,800 Common stock 20,160 Land 4,080 Retained earnings 10,080 Building 40,800 Accumulated depreciation (20,400 ) NGN 50,400 NGN 50,400 The subsidiary acquired the inventory on August 1, 2019, and the land and building in 2013. It issued the common stock in 2011. During 2020, the following transactions took place: 2020 Feb. 1 Paid 8,080,000 NGN on the note payable. May 1 Sold entire inventory for 16,800,000 NGN on account. June 1 Sold land for 6,080,000 NGN cash. Aug. 1 Collected all accounts receivable. Sept. 1 Signed long-term note to receive 8,080,000 NGN cash. Oct. 1 Bought inventory for 20,080,000 NGN cash. Nov. 1 Bought land for 3,080,000 NGN on account. Dec. 1 Declared and paid 3,080,000 NGN cash dividend to parent. Dec. 31 Recorded depreciation for the entire year of 2,040,000 NGN. The U.S dollar ($) exchange rates for 1 NGN are as follows: 2011 NGN 1 = $ 0.0056 2013 1 = 0.0050 August 1, 2019 1 = 0.0070 December 31, 2019 1 = 0.0072 February 1, 2020 1 = 0.0074 May 1, 2020 1 = 0.0076 June 1, 2020 1 = 0.0078 August 1, 2020 1 = 0.0082 September 1, 2020 1 = 0.0084 October 1, 2020 1 = 0.0086 November 1, 2020 1 = 0.0088 December 1, 2020 1 = 0.0090 December 31, 2020 1 = 0.0100 Average for 2020 1 = 0.0090 Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2020?
Chapter25: Taxation Of International Transactions
Section: Chapter Questions
Problem 25P
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Question
Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2019, the subsidiary had the following balance sheet (amounts are in thousands [000s]):
| Cash | NGN | 15,120 | Notes payable | NGN | 20,160 | |
| Inventory | 10,800 | Common stock | 20,160 | |||
| Land | 4,080 | 10,080 | ||||
| Building | 40,800 | |||||
| (20,400 | ) | |||||
| NGN | 50,400 | NGN | 50,400 | |||
The subsidiary acquired the inventory on August 1, 2019, and the land and building in 2013. It issued the common stock in 2011. During 2020, the following transactions took place:
| 2020 | |||
| Feb. | 1 | Paid 8,080,000 NGN on the note payable. | |
| May | 1 | Sold entire inventory for 16,800,000 NGN on account. | |
| June | 1 | Sold land for 6,080,000 NGN cash. | |
| Aug. | 1 | Collected all accounts receivable. | |
| Sept. | 1 | Signed long-term note to receive 8,080,000 NGN cash. | |
| Oct. | 1 | Bought inventory for 20,080,000 NGN cash. | |
| Nov. | 1 | Bought land for 3,080,000 NGN on account. | |
| Dec. | 1 | Declared and paid 3,080,000 NGN cash dividend to parent. | |
| Dec. | 31 | Recorded depreciation for the entire year of 2,040,000 NGN. |
The U.S dollar ($) exchange rates for 1 NGN are as follows:
| 2011 | NGN 1 | = | $ | 0.0056 |
| 2013 | 1 | = | 0.0050 | |
| August 1, 2019 | 1 | = | 0.0070 | |
| December 31, 2019 | 1 | = | 0.0072 | |
| February 1, 2020 | 1 | = | 0.0074 | |
| May 1, 2020 | 1 | = | 0.0076 | |
| June 1, 2020 | 1 | = | 0.0078 | |
| August 1, 2020 | 1 | = | 0.0082 | |
| September 1, 2020 | 1 | = | 0.0084 | |
| October 1, 2020 | 1 | = | 0.0086 | |
| November 1, 2020 | 1 | = | 0.0088 | |
| December 1, 2020 | 1 | = | 0.0090 | |
| December 31, 2020 | 1 | = | 0.0100 | |
| Average for 2020 | 1 | = | 0.0090 | |
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Assuming the NGN is the subsidiary's functional currency, what is the translation adjustment determined solely for 2020?
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