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special issues

Maneesh 02 May 2020 at 11:01 AM

CDG Company, a U.S. multinational, has a wholly-owned subsidiary in Switzerland, CDG-Switzerland. CDG-Switzerland’s market is all of Europe, and its financing is obtained in the euro from Dukaes Bank in Germany. Therefore, its functional currency is the euro. However, its accounting records are kept in Swiss francs. Conversion of CDG-Switzerland’s December 31 financial statements from Swiss francs to the euro resulted in a $950,000 loss. Conversion from the euro to U.S. dollars resulted in an $800,000 gain. What amount will CDG Company report as a foreign exchange gain or loss on its income statement for the year ended December 31?
A)$ 950000 loss
B) $150000 loss
C) $800000 loss
D)$ 150000 loss

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FACULTY 12 May 2020 at 12:42 PM

Option A
Loss FromConversion from Currency of record to functional Currency 950000
                   (Remeasurement, It shows in the income from operation)
Gain From conversion of functional Currency to reporting Currency  800000
                  (translation, It shown on the other comprehensive income)
So only remeasurement loss should shown in the income statement $950000

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FACULTY 12 May 2020 at 01:26 PM

Option A
Loss FromConversion from Currency of record to functional Currency 950000
                   (Remeasurement, It shows in the income from operation)
Gain From conversion of functional Currency to reporting Currency  800000
                  (translation, It shown on the other comprehensive income)
So only remeasurement loss should shown in the income statement $950000

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