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.
Answer:B
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.