Question

E7.11 Translated and Remeasured Trial BalancesThe inode Company established a wholly-owned on January 1, 2019, when the exchange rate was $0.30/riyal (SAR). Of Thode's initial SAR200.000.000 investment, SAR100,000,000 was used to acquire plant assets (ten- vear life) and SAR50.000.000 was used to acquire inventory. The remaining amount was initially held as cash by the subsidiary. During 2019. the subsidiary reported net income of SAR20.000.000. Inventory purchases of SAR15.000.000 were made evenly during the year. It paid dividends of SAR10.000.000 on Sentember 30, when the exchange rate was $0.255/SAR. No other transactions occurred between the subsidiary and the parent. The subsidiary's condensed income statement appears below: Sales. . . . . Cost of goods sold (1) ......... Depreciation expense (2) ......... Other cash expenses ........ Net income.... SAR85,000,000 (40,000,000) (10,000,000) (15,000,000) SAR20,000,000 (1) Assume a FIFO inventory flow assumption (2) Relates solely to plant assets acquired on January 1, 2019. The average rate during the year was $0.265/SAR. On the balance sheet date, it was $0.25/SAR. Required a. Assuming the functional currency is the riyal, translate the subsidiary's preclosing trial balance at De- cember 31, 2019, and prepare a schedule calculating the subsidiary's translation gain or loss for 2019. b. Assuming the functional currency is the U.S. dollar, remeasure the subsidiary's preclosing trial bal- ance at December 31, 2019, and prepare a schedule calculating the subsidiary's remeasurement gain or loss for 2019.

Answer 1

Please note that for Dividend amount I had used different rate, which was given in the Question.

Date Page Income statement for the period ended 31/12/2014 to 20 nomor currency : SARI Particular Amt. Amt Sales Q20 cas.O RAZ Storx 85,000,000 Cost of goods sold (40,000,ood Gross Profit 123102 45,000,000 Depreciation Boo (10000,000 e other expenses tAortor (15,060,000) Net Profit No 29000,000 - 1 Dividend paid 25ano Janto (10,600,000) Net earnings SNOORTton 10,000,000 ves. o -7A2) = x bing bonuia Trial Balance as on 31/12/2014 Dpossi carrency = SARI particular acuasionaal Dr Amtas capital 209000,000 Plant and machinery rolnilogooo, ooo to stock and inventory 50,000,000 cash 50,000,000 200,000,000 200,000,000

Income statomont for year ended as oth 31/12/2019 FX Rate- ISAR = 0.265 USD particular 02 26000 Amt amt sales 71- 79 2 2, 525,000 06) COGS MOHD 10,600,000) Gross profit 2orno gx b neilt taaspoo 00G) Depreciation tada (2,65.0000 ooo other expenses bing brosi (3,975,000 Net income ap 1 5300,000 Dividend paid CFX = ISAR= 0.25SUG) (2,550,000 Nee gain Pic Silliers ! - Balance sheet ason 31/12/2009 2,750,000 Exrate= ISAR=0.25USD DINHERY Partichlar thoniopom Drtholger. Capital H D-50,000,000 Pe plant and machinery 25,000,860 20 12, 50.0000 cash.s 12,500,000 stock and inventory So, 060,000 SO,000,000