Q16. What is the translation gain or loss for Grande, Inc., for the year ended December 31, 2001?

A)   −$1,650,000.

B)   +$50,000.

C)   −$400,000.

Q17. The translation gain or loss from the activities of Grande, Inc., should be reported in:

A)   the statement of cash flows.

B)   the income statement.

C)   the equity accounts.

答案和详解如下：

Q16. What is the translation gain or loss for Grande, Inc., for the year ended December 31, 2001?

A)   −$1,650,000.

B)   +$50,000.

C)   −$400,000.

Correct answer is A)

Exposure under the all-current method is simply equity, which means exposure = 85,000

The currency translation adjustment (CTA) is calculated as the sum of the flow effect and holding effect.

Flow effect (in $) = change in exposure (in LC) × (ending rate − average rate)

Holding gain/loss effect (in $) = beginning exposure (in LC) × (ending rate − beginning rate)

Going back to our data in the example:

Beginning exposure = 80,000,000

Ending exposure = 85,000,000

Change in exposure = 85,000,000 − 80,000,000 = 5,000,000

Flow effect (in $) = 5,000,000 × [$0.10 − $0.11] = 5,000,000 × (−$0.01) = −$50,000

Holding gain/loss effect (in $) = 80,000,000 × ($0.10 − $0.12) = 80,000,000 × (−$0.02) = $−1,600,000

Translation loss (in $) = flow effect + holding gain/loss effect = −$50,000 + (−$1,600,000) = −$1,650,000

Q17. The translation gain or loss from the activities of Grande, Inc., should be reported in:

A)   the statement of cash flows.

B)   the income statement.

C)   the equity accounts.

Correct answer is C)

Under the all-current method, translation gains or losses are accumulated on the balance sheet in the equity section.