A Belgium subsidiary's beginning and ending trial balances appear below: Dr (Cr) January 1 December 31 Cash, receivables € 1,500 € 1,200 Inventories 3,000 3,500 Plant...

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Accounting

A Belgium subsidiary's beginning and ending trial balancesappear below:
Dr (Cr)
January 1
December 31
Cash, receivables
€ 1,500
€ 1,200
Inventories
3,000
3,500
Plant & equipment, net
30,000
39,000
Liabilities
(18,500)
(27,200)
Capital stock
(4,000)
(4,000)
Retained earnings, beginning
(12,000)
(12,000)
Sales revenue
--
(15,000)
Cost of sales
9,500
Out-of-pocket selling & administrative expenses
--
4,000
Depreciation expense
--
1,000
Total
€ 0
€ 0

Exchange rates ($/€) are:
Beginning of year
$1.25
Average for year
1.22
End of year
1.20

The subsidiary was acquired at the beginning of the year. Itssales, inventory purchases, and out-of-pocket selling andadministrative expenses occurred evenly during the year. Equipmentwas purchased for €10,000 when the exchange rate was $1.23.Depreciation for the year includes €200 related to the equipmentpurchased during the year. The ending inventory was purchased atthe end of the year, and the beginning inventory was purchased atthe end of the previous year.

If the subsidiary's functional currency is the euro, what is thetranslation gain or loss for the year?
A.
$810 loss
B.
$1,130 gain
C.
$2,020 loss
D.
$1,030 gain

Answer & Explanation Solved by verified expert

3.6 Ratings (623 Votes)

1 A subsidiary is considered as an NonIntergral foreign operation the activities of which are carried out with a significant degree of autonomy from those of the reporting enterprise 2 A non integral foreign operation accumulates cash and See Answer

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	January 1	December 31
Cash, receivables	€ 1,500	€ 1,200
Inventories	3,000	3,500
Plant & equipment, net	30,000	39,000
Liabilities	(18,500)	(27,200)
Capital stock	(4,000)	(4,000)
Retained earnings, beginning	(12,000)	(12,000)
Sales revenue	--	(15,000)
Cost of sales		9,500
Out-of-pocket selling & administrative expenses	--	4,000
Depreciation expense	--	1,000
Total	€ 0	€ 0