Parentco, Inc

question 5

Multiple Choice

Parentco, Inc. had a negative cumulative translation adjustment of ($250,000) on its balance sheet pertaining to its investment in Subko Ltd at the point in time that Parentco sold its interest in Subko. How must Parentco handle this translation adjustment when it records the sale of Subko?

• A) As an increase in income (gain on disposal)
• B) As a decrease in income (loss on disposal)
• C) The cumulative translation adjustment will not be affected by the sale.
• D) It will be a prior period adjustment to retained earnings.

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Definitions:

Real GDP

The measure of a country's economic output adjusted for price changes (inflation or deflation), reflecting the actual value of goods and services produced over a specific period.

Equilibrium

A state in economics where supply equals demand, resulting in a stable market condition where there is no tendency for change.

Equilibrium Level

The state in an economy or a market where supply equals demand, and there is no tendency for change until an external force is applied.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of goods and services produced in a country.