Foreign currency
RadioShack had a subsidiary in Japan named RadioShack Global Sourcing Ltd. Assume the following hypothetical facts:
RadioShack Global Sourcing Ltd. had 100,000,000 yen in its bank account at 12/31/14. The exchange rate at 12/31/14 was 120 yen = $1.
RadioShack Global Sourcing Ltd. had 100,000,000 yen in its bank account at 12/31/15. The exchange rate at 12/31/15 was 110 yen = $1.
Questions:
When preparing its consolidated financial statements, how much cash in U.S. dollars will RadioShack record for its yen balances at RadioShack Global Sourcing Ltd at 12/31/14 and 12/31/15?
In translating the yen into U.S. dollars in 2015, will RadioShack experience a translation gain or loss? What is the amount of the gain or loss?
If the translation at 12/31/15 produces a translation gain or loss, where will this gain or loss be reflected in RadioShack’s 12/31/15 financial statements?