On January 2, 20X8, Polaris Company acquired a 100% interest in the capital stock of Ski Company for $3,100,000. Any excess cost over book value is attributable to a patent with a 10-year remaining life. At the date of acquisition, Ski's balance sheet contained the following information: Foreign CurrencyUnits (FCU)Cash 40,000 Receivables (net) 150,000 Inventories (FIFO) 500,000 Plant and Equipment (net) 1,500,000 Total 2,190,000 Accounts Payable 200,000 Capital Stock 600,000 Retained Earnings 1,390,000 Total 2,190,000 Ski's income statement for 20X8 is as follows: Foreign CurrencyUnits (FCU)Revenues from Sales 1,010,000 Cost of Goods Sold (590,000) Gross Margin 420,000 Operating Expenses (exclusive of

Question

depreciation)  (120,000) Depreciation Expense  (200,000) Income Taxes  (40,000) Net Income  60,000  The balance sheet of Ski at December 31, 20X8, is as follows: Foreign CurrencyUnits (FCU)Cash  180,000  Receivables (net)  210,000  Inventories (FIFO)  520,000  Plant and Equipment (net)  1,300,000  Total  2,210,000  Accounts Payable  180,000  Capital Stock  600,000  Retained Earnings  1,430,000  Total  2,210,000  Ski declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at various dates for 20X8 follow:   January 21 FCU=$1.50 October 11 FCU=$1.60 December 311 FCU=$1.70 Weighted Average1 FCU=$1.55 ?Assume Ski's revenues, purchases, operating expenses, depreciation expense, and income taxes were incurred evenly throughout 20X8.Refer to the above information. Assuming Ski's FCU is the functional currency, what is the net translation adjustment that result from translating Ski's trial balance into U.S. dollars at December 31, 20X8?

A. $405,000 credit
B. $285,000 credit
C. $396,500 debit
D. $411,000 credit

Answer 1

Answer: A