Boerkian Co. started 2018 with two assets: Cash of §26,000 (Stickles) and Land that originally cost §72,000 when acquired on April 4, 2015. On May 1, 2018, the company rendered services to a customer for §36,000, an amount immediately paid in cash. On October 1, 2018, the company incurred an operating expense of §22,000 that was immediately paid. No other transactions occurred during the year so an average exchange rate is not necessary. Currency exchange rates were as follows: April 4, 2015§1=$0.28January 1, 2018§1=$0.29May 1, 2018§1=$0.30October 1, 2018§1=$0.31December 31, 2018§1=$0.35?Assume Boerkian was a foreign subsidiary of a U.S. multinational company and the U.S. dollar was the functional currency of the subsidiary. Prepare a schedule of changes in the net monetary
assets of Boerkian for the year 2018 and properly label the resulting gain or loss.
What will be an ideal response?
The remeasurement gain or loss is based on changes in the net monetary assets of the subsidiary
| Net monetary assets, 1/1/18 | § | 26,000 | × | $0.29 | = | $ | 7,540 | ||
| Change in net monetary assets, 2018: | |||||||||
| Rendered services | 36,000 | × | $0.30 | = | 10,800 | ||||
| Incurred expense | (22,000 | ) | × | $0.31 | = | (6,820 | ) | ||
| Net monetary assets, 12/31/18 | § | 40,000 | $ | 11,520 | |||||
| Net monetary assets, 12/31/18 at current exchange rate | § | 40,000 | × | $0.35 | = | 14,000 | |||
| Remeasurement gain | $ | 2,480 | |||||||
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