The marketable securities were acquired for 1,000,000 pesos when the exchange rate was $1=20 pesos. Consolidated statements are to be produced, and the current exchange rate is $1=25 pesos. Which of the following statements is true for the consolidated financial statements?Group of answer choicesA positive translation adjustment must be reported. No gain or loss will be reported. A remeasurement gain must be reported. A remeasurement loss must be reported. A negative translation adjustment must be reported.

A negative translation adjustment must be reported.

Explanation:

Under the current rate method, the company must report a negative translation adjustment on a reserve account in the consolidated balance. This reserve account is included in the consolidated balance sheet as unrealized gains/losses.

The marketable securities were purchased at 1,000,000 / 20 = $50,000 (US dollars). But now they are worth only 1,000,000 / 25 = $40,000 (US dollars).

The reserve account of the consolidated financial statements should show a negative foreign currency translation adjustment equal to $10,000 (US dollars).

explanation:

jfx

answer; encouraging the development of innovations by firms attempting to break a monopoly; (creative destruction)