Question

olo Co. Ltd. located in Mexico City is a wholly owned subsidiary of Partner Inc., a U.S. company. At the beginning of the year, Solo’s condensed balance sheet was reported in Mexican pesos (MXP) as follows: Assets 3,375,000 Liabilities 2,810,000 Stockholders’ Equity 565,000 During the year, the company earned income of MXP260,000 and on November 1 declared dividends of MXP165,000. The Mexican peso is the functional currency. Relevant exchange rates between the peso and the U.S. dollar follow: January 1 (beginning of year) $ 0.0870 Average for year 0.0900 November 1 0.0915 December 31 (end of year) 0.0930 Required: a. Prepare a proof of the translation adjustment, assuming that the beginning credit balance of the accumulated other comprehensive income—translation adjustment account was $3,290. (Amounts to be deducted should be indicated with a minus sign.)

SOLO CO. LTD. Proof of Translation Adjustment Year Ended December 31 Translation MXP Rate $ Net assets at beginning of year Adjustment for changes in net assets position during year: Net income for year Dividends Net assets translated at: Rates during year Rates at end of year Change in other comprehensive income-translation adjustment during year (net increase) Accumulated other comprehensive income-translation adjustment, 1/1 (credit) Accumulated other comprehensive income-translation adjustment, 12/31 (credit)

Answer 1

SOLO CO. LTD.
Proof of Translation Adjustment
Year Ended December 31
	Translation
	MXP	Rate	$
Net assets at beginning of year	565,000	$0.0870	49,155
Adjustment for changes in net assets position during year:
Net income for year	260,000	$0.0900	23400
Dividends	(165,000)	$0.0915	(15098)
Net assets translated at:
Rates during year			57457
Rates at end of year	660,000	$0.0930	61,380
Change in other comprehensive income-translation adjustment during year (net increase)			61,380
Accumulated other comprehensive income-translation adjustment, 1/1 (credit)			3,290
Accumulated other comprehensive income-translation adjustment, 12/31 (credit)			64,670