Question

The beginning balance of inventory of us sub is $500,000 on january 1, 2020. sales, purchases, bond interest, and other expenses occurred evenly throughout the year. assume that us sub is a foreign subsidiary that has the same functional currency as abc inc.'s functional currency, and that the net monetary assets where us$350,000 on january 1, 2020. what is the amount of the 2020 exchange gain (loss) that would result from the translation of us1's financial statements?

a. $2,250 exchange gain.
b. $3,000 exchange gain.
c. $6,500 exchange loss.
d. $3,000 exchange loss.
e. $2,500 exchange gain.

Answer 1

The information necessary to calculate the exchange gain or loss, such as exchange rates and any changes in net monetary positions, is not provided. Therefore, a specific answer cannot be determined based on the information available.

Step-by-step explanation:

The question asks for the calculation of the exchange gain or loss resulting from the translation of US1's financial statements. Since the beginning balance of inventory, sales, purchases, bond interest, and other expenses occurred evenly throughout the year and the net monetary assets were US$350,000 on January 1, 2020, the determination of exchange gain or loss requires additional information that is not provided.

The information on external trade and investment, as well as unilateral transfers and income payments, pertains to a current account balance calculation, while the merchandise balance of trade indicates a country's trade deficit or surplus. Calculating the exchange gain or loss would be dependent on changes in the exchange rate throughout the year, which affects the translated value of net monetary assets held in foreign currency.

As the information necessary to calculate the exchange gain or loss is missing, I cannot provide a definitive answer. It would be necessary to have the exchange rate at the beginning and end of the year, or throughout the year if the rate fluctuated significantly, as well as any changes to the net monetary position during the year, to properly calculate the exchange gain or loss.