on december 18 2017 stephanie corporation acquired 100 percent of a swiss company fo 3387121

On December 18, 2017, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2017, the book and fair values of the subsidiary s assets and liabilities were: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CHF 800,000 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,300,000 Property, plant & equipment . . . . . . . . . . . . . . . . . . . . . . . 4,000,000 Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,100,000) Stephanie prepares consolidated financial statements on December 31, 2017. By that date, the Swiss franc has appreciated to $1.10 = CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation. a. Determine the translation adjustment to be reported on Stephanie s December 31, 2017, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary s functional currency. What is the economic relevance of this translation adjustment? b. Determine the remeasurement gain or loss to be reported in Stephanie s 2017 consolidated net income, assuming that the U.S. dollar is the functional currency. What is the economic relevance of this remeasurement gain or loss?

 

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