B is corrent. Translation adjustments result from translating an entity’s financial statements into the reporting currency. Such adjustments, which result when the entity’s functional currency is the foreign currency, should not be included in net income. Instead, such adjustments should be reported as components of "other comprehensive income" and accumulated other comprehensive income in stockholders’ equity. (Note that if the functional currency was the reporting currency, a remeasurement process would have been used instead of translation, with the resulting gain or loss included in income.) The $20,000 translation loss is not reported on the income statement. In contrast, gains and losses which result from foreign exchange transactions (purchases/sales) are reported on the income statement. Therefore, Bart should report the $13,000 foreign exchange loss, plus the $6,000 foreign exchange loss ($106,000 year-end liability less $100,000 original liability), for a total loss of $19,000.
A is incorrect. Translation adjustments result from translating an entity’s financial statements into the reporting currency. Such adjustments, which result when the entity’s functional currency is the foreign currency, should not be included in net income. Instead, such adjustments should be reported as components of "other comprehensive income" and accumulated other comprehensive income in stockholders’ equity. (Note that if the functional currency was the reporting currency, a remeasurement process would have been used instead of translation, with the resulting gain or loss included in income.) The $20,000 translation loss is not reported on the income statement. In contrast, gains and losses which result from foreign exchange transactions (purchases/sales) are reported on the income statement. Therefore, Bart should report the $13,000 foreign exchange loss, plus the $6,000 foreign exchange loss ($106,000 year-end liability less $100,000 original liability), for a total loss of $19,000.
C is incorrect. Translation adjustments result from translating an entity’s financial statements into the reporting currency. Such adjustments, which result when the entity’s functional currency is the foreign currency, should not be included in net income. Instead, such adjustments should be reported as components of "other comprehensive income" and accumulated other comprehensive income in stockholders’ equity. (Note that if the functional currency was the reporting currency, a remeasurement process would have been used instead of translation, with the resulting gain or loss included in income.) The $20,000 translation loss is not reported on the income statement. In contrast, gains and losses which result from foreign exchange transactions (purchases/sales) are reported on the income statement. Therefore, Bart should report the $13,000 foreign exchange loss, plus the $6,000 foreign exchange loss ($106,000 year-end liability less $100,000 original liability), for a total loss of $19,000.
D is incorrect. Translation adjustments result from translating an entity’s financial statements into the reporting currency. Such adjustments, which result when the entity’s functional currency is the foreign currency, should not be included in net income. Instead, such adjustments should be reported as components of "other comprehensive income" and accumulated other comprehensive income in stockholders’ equity. (Note that if the functional currency was the reporting currency, a remeasurement process would have been used instead of translation, with the resulting gain or loss included in income.) The $20,000 translation loss is not reported on the income statement. In contrast, gains and losses which result from foreign exchange transactions (purchases/sales) are reported on the income statement. Therefore, Bart should report the $13,000 foreign exchange loss, plus the $6,000 foreign exchange loss ($106,000 year-end liability less $100,000 original liability), for a total loss of $19,000.
|
