Problem:
Alliance Corporation (an Australian company) invests 1,000,000 marks in a foreign subsidiary on Jan 1, Year 1. The subsidiary commences operations on that date, and generates net income of 200,000 marks during its first year of operation. No dividends are sent to the parent this year. Relevant exchange rate between Alliances reporting currency (A$) and the mark are as follows:
Jan 1, Year 1 A$0.15
Average, Year 1 A$0.17
Dec 31, 1997 A$0.21
Required:
Determine the amount of translation adjustment that Alliance will report on its Dec 31, Year 1 balance sheet.