Translation of Foreign Currency Financial Statements

File: Chapter 10 – Translation of Foreign Currency Financial Statements

 

Multiple Choice:                                                                                

 

[QUESTION]

  1. In accounting, the term translation refers to
  2. A) The calculation of gains or losses from hedging transactions.
  3. B) The calculation of exchange rate gains or losses on individual transactions in foreign currencies.
  4. C) The procedure required to identify a company’s functional currency.
  5. D) The calculation of gains or losses from all transactions for the year.
  6. E) A procedure to prepare a foreign subsidiary’s financial statements for consolidation.

Answer: E

Learning Objective: 10-01

Topic: Translation concepts―Temporal method

Topic: Translation concepts―Current rate method

Difficulty: 1 Easy

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. What is a company’s functional currency?
  2. A) The currency of the primary economic environment in which it operates.
  3. B) The currency of the country where it has its headquarters.
  4. C) The currency in which it prepares its financial statements.
  5. D) The reporting currency of its parent for a subsidiary.
  6. E) The currency it chooses to designate as such.

Answer: A

Learning Objective: 10-02

Topic: Determine the functional currency

Difficulty: 1 Easy

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. According to U.S. GAAP, when the local currency is the functional currency, which method is usually required for translating a foreign subsidiary’s financial statements into the parent’s reporting currency?
  2. A) The temporal method.
  3. B) The current rate method.
  4. C) The current/noncurrent method.
  5. D) The monetary/nonmonetary method.
  6. E) The noncurrent rate method.

Answer: B

Learning Objective: 10-02

Topic: Determine whether current rate or temporal method

Difficulty: 1 Easy

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. In translating a foreign subsidiary’s financial statements, which exchange rate does the current method require for the subsidiary’s assets and liabilities?
  2. A) The exchange rate in effect when each asset or liability was acquired.
  3. B) The average exchange rate for the current year.
  4. C) A calculated exchange rate based on market value.
  5. D) The exchange rate in effect as of the balance sheet date.
  6. E) The exchange rate in effect at the start of the current year.

Answer: D

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 1 Easy

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. When using the current rate method, the translation adjustment from translating a foreign subsidiary’s financial statements should be shown as
  2. A) An asset or liability (depending on the balance) in the consolidated balance sheet.
  3. B) A revenue or expense (depending on the balance) in the consolidated income statement.
  4. C) A component of stockholders’ equity in the consolidated balance sheet.
  5. D) A component of cash flows from financing activities in the consolidated statement of cash flows.
  6. E) An element of the notes which accompany the consolidated financial statements.

Answer: C

Learning Objective: 10-02

Topic: Treatment of translation adjustment

Difficulty: 1 Easy

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

REFERENCE: 10-01

Westmore, Ltd. is a British subsidiary of a U.S. company.  Westmore’s functional currency is the pound sterling (£).  The following exchange rates were in effect during 2018:

[QUESTION]

REFER TO: 10-01

  1. Westmore reported sales of £1,500,000 during 2018. What amount (rounded) would have been included for this subsidiary in calculating consolidated sales?
  2. A) $2,415,000.
  3. B) $2,400,000.
  4. C) $2,385,000.
  5. D) $ 943,396.
  6. E) $ 931,677.

Answer: C

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Current rate method: £1,500,000 × $1.59 (Avg Rate) = $2,385,000

 

[QUESTION]

REFER TO: 10-01

  1. On December 31, 2018, Westmore had accounts receivable of £280,000. What amount (rounded) would have been included for this subsidiary in calculating consolidated accounts receivable?
  2. A) $173,913.
  3. B) $176,100.
  4. C) $445,200.
  5. D) $448,000.
  6. E) $450,800.

Answer: E

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: £280,000 × $1.61 = $450,800

 

[QUESTION]

  1. Gunther Co. established a subsidiary in Mexico on January 1, 2018. The subsidiary engaged in the following transactions during 2018:

What amount of foreign exchange gain or loss would have been recognized in Gunther’s consolidated income statement for 2018?

  1. A) $800,000 gain.
  2. B) $760,000 gain.
  3. C) $320,000 loss.
  4. D) $280,000 loss.
  5. E) $440,000 loss.

Answer: D

Learning Objective: 10-02

Learning Objective: 10-04

Topic:Treatment of translating retained earnings

Topic: Use temporal method for balances

Topic: Prepare remeasurement gain or loss

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Cash: 5,000,000p – 8,000,000p + 12,000,000p – 1,000,000p = = 8,000,000p x current rate $.16 = $1,280,000. Inventory: Average for year purchase 8,000,000p – sell 6,000,000p = 2,000,000 x average rate $.18 = $360,000. Equipment: 1,000,000p x historical rate $.16 = $160,000.

Total assets = $1,280,000 + 360,000 + $160,000 = $1,800,000.

Common stock: 5,000,000p x historical rate $.20 = $1,000,000.

Retained earnings must be $800,000.

There were no beginning retained earnings or dividends. Thus, net income must be $800,000.

Sales: 12,000,000p x weighted average for year $$.18 = 2,160,000.

Cost of goods sold: Purchase 8,000,000p less ending inventory 2,000,000p = $6,000,000 x weighted average rate for year (per information provided for flow of goods) $.18 = $1,080,000.

Gross profit $1,080,000. Expenses: $0. Net income per retained earnings statement must be $800,000.

Remeasurement loss = $1,080,000 – 800,000 – $280,000.

 

Alternatively by doing the statement of cash flows:

  Pesos Translation Rate U.S.$
Operating Activities        
Sales 12,000,000 0.18 A 2,160,000
Cost of Goods Sold 6,000,000 0.18 A (1,080,000)
Net Income 6,000,000     1,080,000
Increase in Inventory (2,000,000) 0.18 A (360,000)
Net Cash from Operations 4,000,000     720,000
Investing Activities        
Purchase Equipment (1,000,000) 0.16 H (160,000)
Net Cash from Investing Activities (1,000,000)     (160,000)
Financing Activities        
Stock Sold 5,000,000 0.20 H 1,000,000
Net Cash from Investing Activities 5,000,000     1,000,000
Increase in Cash 8,000,000     1,560,000
Effect of exchange rate change on cash   To Balance (280,000)
Cash at December 31, 2017        
Cash at December 31, 2018 8,000,000 0.16 C 1,280,000

 

 

REFERENCE: 10-02

Darron Co. was formed on January 1, 2018 as a wholly owned foreign subsidiary of a U.S. corporation.  Darron’s functional currency was the stickle (§).  The following transactions and events occurred during 2018:

[QUESTION]

REFER TO: 10-02

  1. What exchange rate should have been used in translating Darron’s revenues and expenses for 2018?
  2. A) $1 = §.48.
  3. B) $1 = §.44.
  4. C) $1 = §.46.
  5. D) $1 = §.42.
  6. E) $1 = §.45.

Answer: B

Learning Objective: 10-01

Learning Objective: 10-02

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Difficulty: 1 Easy

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Current rate method: Average Rate for Revenues & Expenses [$1 = §.44]

 

[QUESTION]

REFER TO: 10-02

  1. What was the amount of the translation adjustment for 2018?
  2. A) $60,800 decrease in relative value of net assets.
  3. B) $60,800 decrease in relative value of net assets.
  4. C) $61,200 decrease in relative value of net assets.
  5. D) $466,400 increase in relative value of net assets.
  6. E) $26,000 increase in relative value of net assets.

Answer: B

Learning Objective: 10-03

Topic: Prepare translation adjustment

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: [§1,000,000 × [$.42 – $.48] ($.06) = ($60,000)] + [§20,000 × [$.42 – $.46] ($.04)] = ($800) = ($60,800) Loss in Relative Asset Value

 

[QUESTION]

  1. Sinkal Co. was formed on January 1, 2018 as a wholly owned foreign subsidiary of a U.S. corporation. Sinkal’s functional currency was thestickle (§). The following transactions and events occurred during 2018:

What was the amount of the translation adjustment for 2018?

  1. A) $52,000 decrease in relative value of net assets.
  2. B) $60,400 decrease in relative value of net assets.
  3. C) $60,400 increase in relative value of net assets.
  4. D) $440,000decrease in relative value of net assets.
  5. E) $26,000 increase in relative value of net assets.

Answer: B

Learning Objective: 10-03

Topic: Prepare translation adjustment

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: [§1,000,000 × [$.48 – $.42] $.06 = $60,000] + [§20,000 × [$.48 – $.46] $.02] = $400 = $60,400 increase in Relative Asset Value

 

[QUESTION]

  1. Under the current rate method, which accounts are translated using current exchange rates?
  2. A) All revenues and expenses.
  3. B) All assets and liabilities.
  4. C) Cash, receivables, and most liabilities.
  5. D) All current assets and deferred income.
  6. E) All stockholders’ equity.

Answer: B

Learning Objective: 10-01

Topic: Translation concepts―Current rate method

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the temporal method, which accounts are remeasured using current exchange rates?
  2. A) All revenues and expenses.
  3. B) All assets and liabilities.
  4. C) Cash, receivables, and most liabilities.
  5. D) All current assets and deferred income.
  6. E) All stockholders’ equity.

Answer: C

Learning Objective: 10-01

Topic: Translation concepts―Temporal method

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. For a foreign subsidiary that uses the U.S. dollar as its functional currency, what method is requiredto ready the financial statements for consolidation?
  2. A) Current/Noncurrent Method.
  3. B) Monetary/Nonmonetary Method.
  4. C) Current Rate Method.
  5. D) Temporal Method.
  6. E) Indirect Method.

Answer: D

Learning Objective: 10-02

Topic: Determine whether current rate or temporal method

Difficulty: 2 Medium

Blooms: Understand

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

REFERENCE: 10-03

Dilty Corp. owned a subsidiary in France.  Dilty concluded that the subsidiary’s functional currency was the U.S. dollar.

 

[QUESTION]

REFER TO: 10-03

  1. Which one of the following statements would justify this conclusion?
  2. A) Most of the subsidiary’s sales and purchases were with companies in the U.S.
  3. B) Dilty’s functional currency is the dollar and Dilty is the parent.
  4. C) Dilty’s other subsidiaries all had the dollar as their functional currency.
  5. D) Generally accepted accounting principles require that the subsidiary’s functional currency must be the dollar if consolidated financial statements are to be prepared.
  6. E) Dilty is located in the U.S.

Answer: A

Learning Objective: 10-02

Topic: Determine the functional currency

Difficulty: 2 Medium

Blooms: Analyze

AACSB: Diversity

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

REFER TO: 10-03

  1. What must Dilty do to ready the subsidiary’s financial statements for consolidation?
  2. A) First translate, then remeasure them.
  3. B) First remeasure, then translate them.
  4. C) State all of the subsidiary’s accounts in U.S. dollars using the exchange rate in effect at the balance sheet date.
  5. D) Translate them.
  6. E) Remeasure them.

Answer: E

Learning Objective: 10-04

Topic: Use temporal method for balances

Difficulty: 1 Easy

Blooms: Understand

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

REFERENCE: 10-04

Certain balance sheet accounts of a foreign subsidiary of the Tulip Co. had been stated in U.S. dollars as follows:

[QUESTION]

REFER TO: 10-04

  1. If the subsidiary’s local currency is its functional currency, what total amount should be included in Tulip’s balance sheet in U.S. dollars?
  2. A) $609,000.
  3. B) $658,000.
  4. C) $602,000.
  5. D) $630,000.
  6. E) $616,000.

Answer: C

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 1 Easy

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Current rate method: If LC is the Functional Currency, Current Rates Used for All Items = $602,000

 

[QUESTION]

REFER TO: 10-04

  1. If the U.S. dollar is the functional currency of this subsidiary, what total amount should be included in Tulip’s balance sheet in U.S. dollars?
  2. A) $609,000.
  3. B) $658,000.
  4. C) $602,000.
  5. D) $630,000.
  6. E) $616,000.

Answer: E

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Temporal method: If the Dollar is the Functional Currency, Current Rates Used for Receivables at their Historical Rate ($280,000 + $140,000 + $77,000 + $119,000) = $616,000

 

REFERENCE: 10-05

A subsidiary of Porter Inc., a U.S. company, was located in a foreign country.  The functional currency of this subsidiary was the Stickle (§) which is the local currency where the subsidiary is located.  The subsidiary acquired inventory on credit on November 1, 2017, for §120,000 that was sold on January 17, 2018 for §156,000.  The subsidiary paid for the inventory on January 31, 2018.  Currency exchange rates between the dollar and the Stickle were as follows:

November 1, 2017 $.19 = §1
December 31,2017 $.20 = §1
January 1, 2018 $.22 = §1
January 31, 2018 $.23 = §1
Average for 2018 $.24 = §1

 

[QUESTION]

REFER TO: 10-05

  1. What amount would have been reported for this inventory in Porter’s consolidated balance sheet at December 31, 2017?
  2. A) $24,000.
  3. B) $26,400.
  4. C) $22,800.
  5. D) $27,600.
  6. E) $28,800.

Answer: A

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 1 Easy

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Current rate method: §120,000 × $.20 = $24,000

 

[QUESTION]

REFER TO: 10-05

  1. What amount would have been reported for cost of goods sold on Porter’s consolidated income statement at December 31, 2018?
  2. A) $24,000.
  3. B) $26,400.
  4. C) $22,800.
  5. D) $27,600.
  6. E) $28,800.

Answer: E

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Current rate method: §120,000 × $.24 = $28,800

 

[QUESTION]

  1. A U.S. company’s foreign subsidiary had the following amounts in stickles (§) in 2018:

 

The average exchange rate during 2018 was §1 = $.96.  The beginning inventory was acquired when the exchange rate was §1 = $1.20.  The ending inventory was acquired when the exchange rate was §1 = $.90.  The exchange rate at December 31, 2018 was §1 = $.84.  Assuming that the foreign country had a highly inflationary economy, at what amount should the foreign subsidiary’s cost of goods sold have been reflected in the 2018 U.S. dollar income statement?

  1. A) $11,253,600.
  2. B) $11,577,600.
  3. C) $11,649,600.
  4. D) $11,613,600.
  5. E) $11,523,600.

Answer: D

Learning Objective: 10-01

Learning Objective: 10-02

Topic: Temporal method―Cost of goods sold

Topic: Highly inflationary economies

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Beginning Inventory [(§240,000 × $1.20) $288,000] – Purchases [Beginning Inventory §240,000 – COGS §12,000,000 – Ending Inventory §600,000 = §12,360,000 × $.96 = $11,865,600] – Ending Inventory [(§600,000 × $.90) $540,000] = COGS $11,613,600

 

[QUESTION]

  1. A U.S. company’s foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2018:

 

The average exchange rate during 2018 was §1 = $.96.  The beginning inventory was acquired when the exchange rate was §1 = $1.20.  The ending inventory was acquired when the exchange rate was §1 = $.90.  The exchange rate at December 31, 2018 was §1 = $.84.  At what amount should the foreign subsidiary’s cost of goods sold have been reflected in the 2018 U.S. dollar income statement?

  1. A) $11,253,600.
  2. B) $11,577,600.
  3. C) $11,520,000.
  4. D) $11,613,600.
  5. E) $11,523,600.

Answer: C

Learning Objective: 10-01

Learning Objective: 10-02

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Current rate method: §12,000,000 × $.96 = $11,520,000

 

[QUESTION]

  1. A U.S. company’s foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2018:

 

The average exchange rate during 2018 was §1 = $.96.  The beginning inventory was acquired when the exchange rate was §1 = $1.20.  The ending inventory was acquired when the exchange rate was §1 = $.90.  The exchange rate at December 31, 2018 was §1 = $.84.  Assuming that the foreign nation for the subsidiary had a highly inflationary economy, at what amount should that foreign subsidiary’s purchases have been reflected in the 2018 U.S. dollar income statement?

  1. A) $11,865,600.
  2. B) $11,577,600.
  3. C) $11,520,000.
  4. D) $11,613,600.
  5. E) $11,523,600.

Answer: A

Learning Objective: 10-01

Learning Objective: 10-02

Topic: Temporal method―Cost of goods sold

Topic: Highly inflationary economies

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Beginning Inventory §240,000 – COGS §12,000,000 – Ending Inventory §600,000 = Purchases §12,360,000 × $.96 = $11,865,600

 

[QUESTION]

  1. An historical exchange rate for common stock of a foreign subsidiary is best described as
  2. A) The rate at date of the acquisition business combination.
  3. B) The rate when the common stock was originally issued for the acquisition transaction.
  4. C) The average rate from date of acquisition to the date of the balance sheet.
  5. D) The rate from the prior year’s balances.
  6. E) The January 1 exchange rate.

Answer: B

Learning Objective: 10-01

Topic: Translation concepts―Current rate method

Topic: Translation concepts―Temporal method

Difficulty: 2 Medium

Blooms: Understand

AACSB: Diversity

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. A net asset balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true?
  2. A) There is no translation adjustment.
  3. B) There is a transaction loss.
  4. C) There is a transaction gain.
  5. D) There is a negative translation adjustment.
  6. E) There is a positive translation adjustment.

Answer: E

Learning Objective: 10-01

Topic: Net asset or net liability―Adjustment direction

Difficulty: 2 Medium

Blooms: Analyze

AACSB: Diversity

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. A net asset balance sheet exposure exists and the foreign currency depreciates. Which of the following statements is true?
  2. A) There is no translation adjustment.
  3. B) There is a transaction loss.
  4. C) There is a transaction gain.
  5. D) There is a negative translation adjustment.
  6. E) There is a positive translation adjustment.

Answer: D

Learning Objective: 10-01

Topic: Net asset or net liability―Adjustment direction

Difficulty: 2 Medium

Blooms: Analyze

AACSB: Diversity

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. A net liability balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true?
  2. A) There is no translation adjustment.
  3. B) There is a transaction loss.
  4. C) There is a transaction gain.
  5. D) There is a negative translation adjustment.
  6. E) There is a positive translation adjustment.

Answer: D

Learning Objective: 10-01

Topic: Net asset or net liability―Adjustment direction

Difficulty: 2 Medium

Blooms: Analyze

AACSB: Diversity

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. A net liability balance sheet exposure exists and the foreign currency depreciates. Which of the following statements is true?
  2. A) There is no translation adjustment.
  3. B) There is a transaction loss.
  4. C) There is a transaction gain.
  5. D) There is a negative translation adjustment.
  6. E) There is a positive translation adjustment.

Answer: E

Learning Objective: 10-01

Topic: Net asset or net liability―Adjustment direction

Difficulty: 2 Medium

Blooms: Analyze

AACSB: Diversity

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Which method of translating a foreign subsidiary’s financial statements is correct if it is assumed that the parent’s net investment is exposed to foreign exchange risk?
  2. A) Historical rate method.
  3. B) Working capital method.
  4. C) Current rate method.
  5. D) Remeasurement.
  6. E) Temporal method.

Answer: C

Learning Objective: 10-01

Topic: Translation concepts―Current rate method

Difficulty: 1 Easy

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Which method is used for remeasuring a foreign subsidiary’s financial statements?
  2. A) Historical rate method.
  3. B) Working capital method.
  4. C) Current rate method.
  5. D) Translation.
  6. E) Temporal method.

Answer: E

Learning Objective: 10-02

Topic: Determine whether current rate or temporal method

Difficulty: 1 Easy

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the temporal method, inventory at net realizable value would be remeasuredfor the balance sheet at what rate?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: C

Learning Objective: 10-01

Topic: Treatment of inventory at net realizable value

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the current rate method, inventory at net realizable value would be translatedfor the balance sheet at what rate?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: C

Learning Objective: 10-01

Topic: Treatment of inventory at net realizable value

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the temporal method, common stock would be remeasured at what rate?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: D

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 1 Easy

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the current rate method, common stock would be translated at what rate?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: D

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 1 Easy

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the current rate method, property, plant & equipment would be translated at what rate?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: C

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the temporal method, property, plant & equipment would be remeasured at what rate?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: D

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the current rate method, retained earnings would be translated at what rate?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: E

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the temporal method, retained earnings would be remeasured at what rate?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: E

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 2 Medium

Blooms: Understand

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the current rate method, depreciation expense would be translated at what rate?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: B

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the temporal method, depreciation expense would be remeasured at what rate?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: D

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the temporal method, how would cost of goods sold be remeasured?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) A single historical rate.
  6. E) Historical rates.

Answer: E

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 2 Medium

Blooms: Understand

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under the current rate method, how would cost of goods sold be translated?
  2. A) Beginning of the year rate.
  3. B) Average rate.
  4. C) Current rate.
  5. D) Historical rate.
  6. E) Composite amount.

Answer: B

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Where is the translationadjustment reported in the parent company’s financial statements?
  2. A) Net loss in the income statement.
  3. B) Cumulative translation adjustment as a deferred asset.
  4. C) Cumulative translation adjustment as a deferred liability.
  5. D) Accumulated other comprehensive income.
  6. E) Retained earnings.

Answer: D

Learning Objective: 10-02

Topic: Treatment of translation adjustment

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Where is the remeasurement gain or loss reported in the parent company’s financial statements?
  2. A) Net income/loss in the income statement.
  3. B) Cumulative translation adjustment as a deferred asset.
  4. C) Cumulative translation adjustment as a deferred liability.
  5. D) Other comprehensive income.
  6. E) Retained earnings.

Answer: A

Learning Objective: 10-02

Topic: Treatment of translation adjustment

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. A highly inflationary economy is defined as
  2. A) Cumulative 5-year inflation in excess of 100%.
  3. B) Cumulative 3-year inflation in excess of 100%.
  4. C) Cumulative 5-year inflation in excess of 90%.
  5. D) Cumulative 3-year inflation in excess of 90%.
  6. E) Any country designated as a company operating in a third-world economy.

Answer: B

Learning Objective: 10-02

Topic: Highly inflationary economies

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. If a subsidiary is operating in a highly inflationary economy, how are the financial statements to be restated?
  2. A) Historical rate.
  3. B) Working capital rate.
  4. C) Translation.
  5. D) Temporal method.
  6. E) Current rate.

Answer: D

Learning Objective: 10-02

Topic: Highly inflationary economies

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. When consolidating a foreign subsidiary, which of the following statements is true?
  2. A) Parent reports a cumulative translation adjustment from adjusting its investment account under the equity method.
  3. B) Parent reports a gain or loss in net income from adjusting its investment account under the equity method.
  4. C) Subsidiary’s cumulative translation adjustment is carried forward to the consolidated balance sheet.
  5. D) Subsidiary’s income/loss is carried forward to the consolidated balance sheet.
  6. E) All foreign currency gains/losses are eliminated in the consolidated income statement and balance sheet.

Answer: C

Learning Objective: 10-06

Topic: Preparing a consolidation worksheet

Difficulty: 3 Hard

Blooms: Analyze

AACSB: Diversity

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Decision Making

 

[QUESTION]

  1. When preparing a consolidated statement of cash flows, which of the following statements is false?
  2. A) All operating activity items are translated at an average exchange rate for the period.
  3. B) A change in accounts receivable is translated using the current rate.
  4. C) A change in long-term debt is translated using the historical rate at the date of the change.
  5. D) Dividends paid are translated using the historical rate at the date of the payment.
  6. E) All items follow translation rates used for the balance sheet and the income statement.

Answer: B

Learning Objective: 10-03

Topic: Use current rate method for balances

Difficulty: 3 Hard

Blooms: Analyze

AACSB: Diversity

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. When preparing a consolidation worksheet for a parent and its foreign subsidiary accounted for under the equity method, which of the following statements is false?
  2. A) The cumulative translation adjustment included in the Investment in Subsidiary account is eliminated.
  3. B) The excess of fair value over book value since the date of acquisition is revalued for the change in exchange rate.
  4. C) The amount of equity income recognized by the parent in the current year is eliminated.
  5. D) The allocations of excess of fair value over book value at the date of acquisition are eliminated.
  6. E) The subsidiary’s stockholders’ equity accounts as of the beginning of the year are eliminated.

Answer: D

Learning Objective: 10-06

Topic: Preparing a consolidation worksheet

Difficulty: 2 Medium

Blooms: Analyze

AACSB: Diversity

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Measurement

 

REFERENCE: 10-06

Esposito is an Italian subsidiary of a U.S. company.

Esposito’s ending inventory is valued at the average cost for the last quarter of the year.

The following account balances are available for Esposito for 2018:

[QUESTION]

REFER TO: 10-06

  1. Compute the cost of goods sold for 2018 in U.S. dollars using the temporal method.
  2. A) $376,650.
  3. B) $387,750.
  4. C) $388,800.
  5. D) $400,950.
  6. E) $409,050.

Answer: B

Learning Objective: 10-01

Learning Objective: 10-04

Topic: Temporal method―Cost of goods sold

Topic:Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Begin Inventory (€20,000 × $.93 = $18,600) + Purchases (€400,000 × $.96 = $384,000) – End Inventory (€15,000 × $.99 = $14,850) = COGS $387,750

 

[QUESTION]

REFER TO: 10-06

  1. Compute the cost of goods sold for 2018 in U.S. dollars using the current rate method.
  2. A) $376,550.
  3. B) $387,750.
  4. C) $388,800.
  5. D) $400,950.
  6. E) $409,050.

Answer: C

Learning Objective: 10-01

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €405,000 × $.96 = $388,800

 

[QUESTION]

REFER TO: 10-06

  1. Compute ending inventory for 2018 under the temporal method.
  2. A) $13,950.
  3. B) $14,100.
  4. C) $14,400.
  5. D) $14,850.
  6. E) $15,150.

Answer: D

Learning Objective: 10-01

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €15,000 × $.99 = $14,850

 

[QUESTION]

REFER TO: 10-06

  1. Compute ending inventory for 2018 under the current rate method.
  2. A) $13,950.
  3. B) $14,100.
  4. C) $14,400.
  5. D) $14,850.
  6. E) $15,150.

Answer: E

Learning Objective: 10-01

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €15,000 × $1.01 = $15,150

 

REFERENCE: 10-07

A foreign subsidiary uses the first-in first-out inventory method.  The following inventory balances are givenat December 31,2018 in local currency units (LCU):

[QUESTION]

REFER TO: 10-07

  1. Compute the December 31, 2018, inventory balance using the lower of cost or net realizable value method under the temporal method.
  2. A) $321,000.
  3. B) $457,600.
  4. C) $596,400.
  5. D) $454,400.
  6. E) $419,000.

Answer: B

Learning Objective: 10-01

Topic: Treatment of inventory at net realizable value

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Inventory at Historical Cost 320,000 LCU × $1.43 = $457,600. Inventory at Net Realizable Value 420,000 LCU × $1.42 = $596,400. Report at the lower of the two dollar amounts = $457,600.

 

[QUESTION]

REFER TO: 10-07

  1. Compute the December 31, 2018, inventory balance using the current rate method.
  2. A) $454,400.
  3. B) $457,600.
  4. C) $596,400.
  5. D) $419,000.
  6. E) $321,000.

Answer: A

Learning Objective: 10-01

Topic: Treatment of inventory at net realizable value

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Inventory at Cost 320,000 LCU × $1.42 = $454,400

 

REFERENCE: 10-08

Perez Company, a Mexican subsidiary of a U.S. company, sold equipment costing 200,000 pesos with accumulated depreciation of 75,000 pesos for 140,000 pesos on March 1, 2018.  The equipment was purchased on January 1, 2017.  Relevant exchange rates for the peso are as follows:

[QUESTION]

REFER TO: 10-08

  1. The financial statements for Perez are translated by its U.S. parent. What amount of gain or loss would be reported in its translated income statement?
  2. A) $1,530.
  3. B) $1,575.
  4. C) $1,590.
  5. D) $1,090.
  6. E) $1,650.

Answer: C

Learning Objective: 10-01

Topic: Treatment for gain or loss on sale of asset

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: [Sales Price 140,000p × $.106 = $14,840] – [BV at Historical Cost 200,000p – Acc. Deprec. 75,000p = 125,000p × $.106 = $13,250] = $1,590 Gain

 

[QUESTION]

REFER TO: 10-08

  1. The financial statements for Perez are remeasured by its U.S. parent. What amount of gain or loss would be reported in its translated income statement?
  2. A) $1,530.
  3. B) $1,575.
  4. C) $1,590.
  5. D) $1,090.
  6. E) $1,650.

Answer: D

Learning Objective: 10-01

Topic: Treatment for gain or loss on sale of asset

Topic: Temporal method―Property and depreciation

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: [Sales Price 140,000p × $.106 = $14,840] – [BV at Historical Cost 200,000p – Acc. Deprec. 75,000p = 125,000p × $.110 = $13,750] = $1,090 Gain

 

REFERENCE: 10-09

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2018, have been restated into U.S. dollars as follows:

[QUESTION]

REFER TO: 10-09

  1. Assuming the functional currency of the subsidiary is the U.S. dollar, what total should be included in Parker’s consolidated balance sheet at December 31, 2018, for the above items?
  2. A) $407,500.
  3. B) $418,000.
  4. C) $396,000.
  5. D) $403,500.
  6. E) $398,500.

Answer: A

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: If the Dollar is the Functional Currency, Current Rates Used for All Items except PP&E at their Historical Values ($47,500 + $95,000 + $76,000 + $54,000 + $135,000) = $407,500

 

[QUESTION]

REFER TO: 10-09

  1. Assuming the functional currency of the subsidiary is the local currency, what total should be included in Parker’s consolidated balance sheet at December 31, 2018, for the above items?
  2. A) $407,500.
  3. B) $418,000.
  4. C) $396,000.
  5. D) $403,500.
  6. E) $398,500.

Answer: B

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: If LC is the Functional Currency, Current Rates Used for All Items = $418,000

 

[QUESTION]

REFER TO: 10-09

  1. If the current rate used to restate these amounts is $.95, what was the average historical rate used to arrive at the total amount for historical rates?
  2. A) $0.9000.
  3. B) $1.0000.
  4. C) $0.9500.
  5. D) $0.9474.
  6. E) $1.0556.

Answer: A

Learning Objective: 10-04

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Analyze

AACSB: Diversity

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Measurement

Feedback: $418,000 / $.95 = $440,000; $396,000 / $440,000 = $.90

 

REFERENCE: 10-10

Kennedy Company acquired all of the outstanding common stock of Hastie Company of Canada for U.S. $350,000 on January 1, 2018, when the exchange rate for the Canadian dollar (CAD) was U.S. $.70.  The fair value of the net assets of Hastie was equal to their book value of CAD 450,000 on the date of acquisition.  Any acquisition consideration excess over fair value was attributed to an unrecorded patent with a remaining life of five years.  The functional currency of Hastie is the Canadian dollar.

For the year ended December 31, 2018, Hastie’s trial balance net income was translated at U.S. $25,000.  The averageexchange rate for the Canadian dollar during 2018 was U.S. $.68, and the 2018 year-end exchange rate was U.S. $.65.

 

[QUESTION]

REFER TO: 10-10

  1. Calculate the U.S. dollar amount allocated to the patent at January 1, 2018.
  2. A) $50,000.
  3. B) $35,000.
  4. C) $34,000.
  5. D) $32,500.
  6. E) $28,200.

Answer: B

Learning Objective: 10-06

Topic: Preparing a consolidation worksheet

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: $350,000 – FV of Assets (C$450,000 × $.70) $315,000 = $35,000 Patent Value

 

[QUESTION]

REFER TO: 10-10

  1. Amortization of the patent, translated, for 2018 would be
  2. A) $ 7,000.
  3. B) $10,000.
  4. C) $ 6,800.
  5. D) $ 9,000.
  6. E) $ 6,500.

Answer: C

Learning Objective: 10-06

Topic: Preparing a consolidation worksheet

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Patent Value $35,000 / $.70 = Patent Value C$50,000 / 5 yrs = C$10,000 per year × $.68 = $6,800 Translated

 

[QUESTION]

REFER TO: 10-10

  1. Compute the amount of the patent reported in the consolidated balance sheet at December 31, 2018.
  2. A) $28,200.
  3. B) $25,700.
  4. C) $35,000.
  5. D) $27,200.
  6. E) $26,000.

Answer: E

Learning Objective: 10-06

Topic: Preparing a consolidation worksheet

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Patent Value C$50,000 – Amortization for 2018 C$10,000 = BV C$40,000 × $.65 = $26,000 Translated

 

[QUESTION]

REFER TO: 10-10

  1. Kennedy’s share of Hastie’s net income for 2018 would be
  2. A) $18,000.
  3. B) $15,000.
  4. C) $18,200.
  5. D) $16,000.
  6. E) $18,500.

Answer: C

Learning Objective: 10-06

Topic: Preparing a consolidation worksheet

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: Translated Net Income $25,000 – Translated Amortization $6,800 = $18,200 Parent’s Share of Net Income for 2018

 

REFERENCE: 10-11

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2017.  Selected account balances are available for the year ended December 31, 2018, and are stated in Euro, the local currency.

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the Euro; compute the U.S. income statement amount for sales for 2018.
  2. A) $364,000.
  3. B) $372,000.
  4. C) $380,000.
  5. D) $360,000.
  6. E) $404,000.

Answer: C

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 1 Easy

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €400,000 × $.95 = $380,000

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the Euro; compute the U.S. balance sheet amount for inventory at December 31,2018.
  2. A) $18,800.
  3. B) $19,600.
  4. C) $18,000.
  5. D) $20,200
  6. E) $19,000.

Answer: D

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €20,000 × $1.01 = $20,200

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the Euro; compute the U.S. balance sheet amount for equipment for 2018.
  2. A) $81,900.
  3. B) $90,900.
  4. C) $83,700.
  5. D) $88,200.
  6. E) $85,500.

Answer: B

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €90,000 × $1.01 = $90,900

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the Euro; compute the U.S. Statement of Retained Earnings amount reported for Dividends in 2018.
  2. A) $19,000.
  3. B) $20,200.
  4. C) $18,600.
  5. D) $19,400.
  6. E) $19,600.

Answer: D

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €20,000 × $.97 = $19,400

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the Euro; compute the U.S. balance sheet amount for accumulated depreciation for 2018.
  2. A) $40,950.
  3. B) $41,850.
  4. C) $45,450.
  5. D) $42,750.
  6. E) $44,100.

Answer: C

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €45,000 × $1.01 = $45,450

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the Euro; compute the U.S. income statement amount for depreciation expense for 2018.
  2. A) $8,190.
  3. B) $8,370.
  4. C) $8,820.
  5. D) $9,090.
  6. E) $8,550.

Answer: E

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €9,000 × $.95 = $8,550

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the U.S. Dollar; compute the U.S. income statement amount for sales for 2018.
  2. A) $364,000.
  3. B) $372,000.
  4. C) $380,000.
  5. D) $360,000.
  6. E) $404,000.

Answer: C

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €400,000 × $.95 = $380,000

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for inventory, at cost, for 2018.
  2. A) $18,800.
  3. B) $19,600.
  4. C) $18,000.
  5. D) $20,200.
  6. E) $19,000.

Answer: A

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €20,000 × $.94 = $18,800

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for equipment for 2018.
  2. A) $81,900.
  3. B) $90,900.
  4. C) $83,700.
  5. D) $88,200.
  6. E) $85,500.

Answer: A

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €90,000 × $.91 = $81,900

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the U.S. Dollar; compute the U.S. statement of retained earnings amount for dividends for 2018.
  2. A) $19,000.
  3. B) $20,200.
  4. C) $18,600.
  5. D) $19,400.
  6. E) $19,600.

Answer: D

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €20,000 × $.97 = $19,400

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for accumulated depreciation for 2018.
  2. A) $40,950.
  3. B) $41,850.
  4. C) $45,450.
  5. D) $42,750.
  6. E) $44,100.

Answer: A

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €45,000 × $.91 = $40,950

 

[QUESTION]

REFER TO: 10-11

  1. Assume the functional currency is the U.S. Dollar; compute the U.S. income statement amount for depreciation expense for 2018.
  2. A) $8,190.
  3. B) $8,370.
  4. C) $8,820.
  5. D) $9,090.
  6. E) $8,550.

Answer: A

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

Feedback: €9,000 × $.91 = $8,190

 

Essay:

 

[QUESTION]

  1. A foreign subsidiary was acquired on January 1, 2018. Determine the exchange rate used to restate the following accounts at December 31, 2018. Land was purchased on October 1, 2018.  Relevant exchange dates follow:

(A) January 1, 2018

(B) October 1, 2018

(C) December 31, 2018

(D) Average, 2018

(E) Composite, using multiple dates.

Identify the exchange rate used to translate items 1-5 when the functional currency is the foreign currency:

____ 1. Land.

____ 2. Equipment.

____ 3. Bonds payable.

____ 4. Common stock.

____ 5. Retained earnings.

Identify the exchange rate used to remeasure the items 6-10 when the functional currency is the U.S. dollar:

____ 6. Land.

____ 7. Equipment.

____ 8. Bonds payable.

____ 9. Common stock.

____ 10. Retained earnings.

Answer: (1.) C; (2) C; (3.)  C; (4.)  A; (5.)  E; (6.)  B; (7.)  A; (8.)  C; (9.)  A; (10.)  E

Learning Objective: 10-01

Learning Objective: 10-02

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. In translating a foreign subsidiary’s financial statements, what exchange rate should be used for the subsidiary’s revenues and expenses?

 

Answer: The historical rate that was in effect when the revenues and expenses were incurred should be used unless those revenues and expenses occur throughout the year, and then a weighted average exchange rate for the year may be used.

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. How can a parent corporation determine the functional currency for a foreign subsidiary that conducts business in more than one country?

 

Answer: If the foreign subsidiary has distinct and separable operations in different countries, each of these operations can use a different currency.  If the subsidiary does not have distinct operations in different countries, the currency in which the most transactions are carried out should be selected.

Learning Objective: 10-02

Topic: Determine the functional currency

Difficulty: 2 Medium

Blooms: Analyze

AACSB: Diversity

AACSB: Communication

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Decision Making

 

[QUESTION]

  1. What exchange rate should be used to translate (a) revenues and expenses that occur throughout the year and (b) a gain or loss that occurs on a specific day?

 

Answer: Revenues and expenses occurring throughout the year may be translated using the average exchange rate for the year.  A gain or loss occurring on a specific date should be translated using the rate in effect on that day.

Learning Objective: 10-01

Topic: Translation method―Choose the rate to use

Difficulty: 1 Easy

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Perkle Co. owned a subsidiary in Belgium; the subsidiary’s functional currency was the Belgian franc. During 2018, Perkle engaged in hedging transactions to offset part of the subsidiary’s net asset position.  How should the effects of exchange rate fluctuations on the currency hedge be accounted for?

 

Answer: Any effect on the contract resulting from exchange rate fluctuations is classified as a translation adjustment, rather than as a foreign exchange gain or loss.

Learning Objective: 10-05

Topic: Hedging balance sheet exposure

Difficulty: 1 Easy

Blooms: Understand

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Under what circumstances would the remeasurement of a foreign subsidiary’s financial statements be required?

 

Answer: The remeasurement of a foreign subsidiary’s financial statements is required in the following situations:

(A.)When the subsidiary’s functional currency is the U.S. dollar.

(B.)When the subsidiary operates in a highly inflationary economy.

(C.) When the local currency is not the functional currency and the statements first need to be remeasured from one foreign currency to another foreign currency.

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Determine whether current rate or temporal method

Topic: Highly inflationary economies

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. A foreign subsidiary of a U.S. corporation purchased equipment on January 4, 2015.

(A.) How would depreciation expense on the equipment be translated for 2018?

(B.) How would depreciation expense on the equipment be remeasured for 2018?

 

Answer: (A.) Depreciation expense would be translated using the average exchange rate for 2018.  (B.) Depreciation expense would be remeasured using the exchange rate in effect when the equipment was purchased.

Learning Objective: 10-01

Learning Objective: 10-02

Topic: Translation method―Choose the rate to use

Topic: Temporal method―Property and depreciation

Difficulty: 2 Medium

Blooms: Remember

AACSB: Diversity

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. What exchange rate would be used to translate the asset and liability account balances of a foreign subsidiary when the local currency is the functional currency? What justification can be given for using this exchange rate?

 

Answer: Assets and liabilities are translated using the current exchange rate; the rate in effect at the balance sheet date.  This rate is chosen because assets and liabilities are expected to affect future cash flows.  Therefore, they should be translated using the most up-to-date exchange rates available.

Learning Objective: 10-01

Topic: Translation concepts―Current rate method

Difficulty: 1 Easy

Blooms: Understand

AACSB: Diversity

AACSB: Communication

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. Farley Brothers, a U.S. company, had a subsidiary in Italy. Under what conditions would the U.S. dollar be consideredthe functional currency for this subsidiary?

 

Answer: To determine the subsidiary’s functional currency, Farley Brothers should look at the volume of the subsidiary’s transactions in various currencies.  If most of the subsidiary’s sales and purchases are in dollars, the dollar may be the logical choice for the functional currency.  If there are many transactions between the subsidiary and the parent, and if most of the subsidiary’s financing comes from the U.S., the dollar may be a better choice than the euro.

Learning Objective: 10-02

Topic: Determine the functional currency

Difficulty: 1 Easy

Blooms: Understand

AACSB: Diversity

AACSB: Communication

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Decision Making

 

[QUESTION]

  1. What is the justification for the remeasurement of foreign currency transactions?

 

Answer: Remeasurement is needed for transactions denominated in a currency other than the entity’s functional currency.  A U.S. company that engages in transactions in other countries may have to remeasure some of its transactions.  The implicit justification for remeasurement is that foreign currency transactions affecting monetary assets and liabilities have a direct effect on the entity’s cash flows.  There will be direct effects on future cash flows in the functional currency, and thus an effect on net income.

Learning Objective: 10-01

Topic: Translation concepts―Temporal method

Difficulty: 2 Medium

Blooms: Evaluate

AACSB: Diversity

AACSB: Communication

AACSB: Analytical Thinking

AICPA: BB Global

AICPA: FN Decision Making

 

[QUESTION]

  1. Contrast the purpose of remeasurement with the purpose of translation.

 

Answer: The purpose of translation is to transform a subsidiary’s financial statements, prepared in its functional currency, into the reporting currency of the parent.  The purpose of remeasurement is to restate transactions from one currency into the functional currency of the entity.  Remeasurement is also required when a subsidiary’s financial statements have been denominated in a currency other than the subsidiary’s functional currency.

Learning Objective: 10-01

Learning Objective: 10-04

Topic: Translation concepts―Current rate method

Topic: Translation concepts―Temporal method

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Understand

AACSB: Diversity

AACSB: Communication

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Decision Making

 

Problems:

 

[QUESTION]

  1. On January 1, 2018, Fandu Corp. began operations of a foreign subsidiary. On April 1, 2018, the subsidiary purchased inventory costing 150,000 stickles.  One-fourth of this inventory remained unsold at the end of 2018 while 40% of the liability from the purchase had not yet been paid.  The pertinent indirect exchange rates were:

Required:

What should have been the December 31, 2018 inventory and accounts payable balances for this foreign subsidiary as translated into U.S. dollars? (Round your answers to the nearest whole dollar.)

 

Answer:

Learning Objective: 10-01

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Use current rate method for balances

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

  1. On January 1, 2018, Veldon Co., a U.S. corporation with the U.S. dollar as its functional currency, established Malont Co. as a subsidiary. Malont is located in the country of Sorania, and its functional currency is the stickle(§).  Malont engaged in the following transactions during 2018:

Required:

Calculate the translation adjustment for Malont. (Round your answers to the nearest whole dollar.)

 

Answer:

  Stickles Rate U.S. Dollars
Net assets, 1/1/18  §       0    
Change in net assets, 2018:      
    Common stock issuance   500,000 §2.5H $1,250,000
    Operating income   150,000 §2.4A      360,000
    Gain on sale of patent     40,000 §2.1H        84,000
    Dividends paid     (60,000) §2.6H    (156,000)
Net assets, 12/31/18 § 630,000   $1,538,000
Net assets, 12/31/18 at current
exchange rate

§ 630,000
§2.7C
1,701,000
Translation adjustment , 2018
(positive)
   
$  (163,000)

 

Learning Objective: 10-03

Topic: Prepare translation adjustment

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

 

REFERENCE: 10-12

Ginvold Co. began operating a subsidiary in a foreign country on January 1, 2018 by acquiring all of the common stock for §50,000 Stickles, the local currency.  This subsidiary immediately borrowed §120,000 on a five-year note with ten percent interest payable annually beginning on January 1, 2019.  A building was then purchased for §170,000 on January 1, 2018.  This property had a ten-year anticipated life and no salvage value and was to be depreciated using the straight-line method.  The building was immediately rented for three years to a group of local doctors for §6,000 per month.  By year-end, payments totaling §60,000 had been received.  On October 1, §5,000 were paid for a repair made on that date and it was the only transaction of this kind for the year.  A cash dividend of §6,000 was transferred back to Ginvold on December 31, 2018.  The functional currency for the subsidiary was the Stickle (§).  Currency exchange rates were as follows:

[QUESTION]

REFER TO: 10-12

  1. Prepare an income statement for this subsidiary in stickles and then translate these amounts into U.S. dollars.

 

Answer:

Learning Objective: 10-01

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

REFER TO: 10-12

  1. Prepare a statement of retained earnings for this subsidiary in stickles and then translate the amounts into U.S. dollars.

 

Answer:

Ginvold Co. Subsidiary

Statement of Retained Earnings

For the Year Ended December 31, 2018

  Stickles Rate U.S. Dollars
Retained earnings, 1/1/18 §          0   $            0
Net income   38,000 (above) 86,940
Dividends paid     (6,000) x $2.16H=  (12,960)
Retained earnings, 12/31/18 §32,000   $73,980

Learning Objective: 10-01

Learning Objective: 10-03

Topic: Treatment of translating retained earnings

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

REFER TO: 10-12

  1. Prepare a balance sheet for this subsidiary in stickles and then translate the amounts into U.S. dollars.

 

Answer:

Ginvold Co. Subsidiary

Balance Sheet

December 31, 2018

 

  Stickles Rate U. S. Dollars
Cash § 49,000 x  $2.16C = $ 105,840
Rent receivable    12,000 x  $2.16C =     25,920
Building   170,000 x  $2.16C =    367,200
Accumulated depreciation    (17,000) x  $2.16C =     (36,720)
    Total assets §214,000   $ 462,240
       
Interest payable § 12,000 x  $2.16C = $  25,920
Note payable   120,000 x  $2.16C =   259,200
Common stock     50,000 x  $2.40H =   120,000
Retained earnings     32,000 (above)     73,980
Translation adjustment ______0_ (below)    (16,860)
    Total liabilities and equities §214,000   $462,240
       
Calculation of Translation Adjustment      
Net assets, 1/1/18 §        0   $         0
Change in net assets, 2018:      
   Common stock issuance    50,000 x  $2.40 =   120,000
   Net income    38,000 (above)     86,940
   Dividends paid      (6,000) x  $2.16 =     (12,960)
Net assets, 12/31/18 §  82,000   $193,980
Net assets, 12/31/18 at current
exchange rate

§  82,000
x  $2.16 =
177,120
Translation adjustment, 2018
negative
   
$  16,860

Learning Objective: 10-03

Topic: Prepare translation adjustment

Topic: Use current rate method for balances
Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

REFER TO: 10-12

  1. Prepare a statement of cash flows for this subsidiary in stickles and then translate the amounts into U.S. dollars.

 

Answer:

Ginvold Co. Subsidiary

Statement of Cash Flows

For the Year Ended, December 31, 2018

 

  Stickles Rate U. S. Dollars
Operating activities:      
    Net income § 38,000 (Above) $ 86,940
    Depreciation    17,000 x  $2.28A =    38,760
    Increase in rent receivable (12,000) x  $2.28A =  (27,360)
    Increase in interest payable    12,000 x  $2.28A =    27,360
        Net cash from operations    55,000    125,700
Investing activities:      
     Purchase of building (170,000) x  $2.40H = (408,000)
Financing activities:      
    Proceeds from common stock    50,000 x  $2.40H =  120,000
    Proceeds from note payable  120,000 x  $2.40H =  288,000
    Dividend paid    (6,000) x  $2.16H =   (12,960)
       Net cash from financing  164,000     395,040
Increase in cash    49,000     112,740
Effect of exchange rate change on cash         (6,900)
Cash at December 31, 2017             0               0
Cash at December 31, 2018 § 49,000 x  $2.16C = $105,840

Learning Objective: 10-03

Topic: Use current rate method for balances

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

 

REFERENCE: 10-13

Boerkian Co. started 2018 with two assets:  Cash of §26,000 (Stickles) and Land that originally cost §72,000 when acquired on April 4, 2015.  On May 1, 2018, the company rendered services to a customer for §36,000, an amount immediately paid in cash.  On October 1, 2018, the company incurred an operating expense of §22,000 that was immediately paid.  No other transactions occurred during the year so an average exchange rate is not necessary.  Currency exchange rates were as follows:

[QUESTION]

REFER TO: 10-13

  1. Assume that Boerkian was a foreign subsidiary of a U.S. multinational company and the stickle(§) was the functional currency of the subsidiary. Calculate the translation adjustment for this subsidiary for 2018 and state whether this is a positive or a negative adjustment.

 

Answer:

Learning Objective: 10-03

Topic: Prepare translation adjustment

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

REFER TO: 10-13

  1. Assume Boerkian was a foreign subsidiary of a U.S. multinational company and the U.S. dollar was the functional currency of the subsidiary. Prepare a schedule of changes in the net monetary assets of Boerkian for the year 2018 and properly label the resulting gain or loss.

 

Answer:

Learning Objective: 10-04

Topic: Prepare remeasurement gain or loss

Difficulty: 3 Hard

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

REFER TO: 10-13

  1. Required:

Assume that Boerkian was a foreign subsidiary of a U.S. multinational company and the local currency of the subsidiary (stickle) is the functional currency.  On the December 31, 2018 balance sheet, what was the translated value of the Land account?

 

Answer:

 

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-03

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use current rate method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

 

[QUESTION]

REFER TO: 10-13

  1. Assume that Boerkian was a foreign subsidiary of a U.S. multinational company and the U.S. dollar is the functional currency. On the December 31, 2018 balance sheet, what was the remeasured value of the Land account?

 

Answer:

Learning Objective: 10-01

Learning Objective: 10-02

Learning Objective: 10-04

Topic: Translation method―Choose the rate to use

Topic: Determine whether current rate or temporal method

Topic: Use temporal method for balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Diversity

AACSB: Knowledge Application

AICPA: BB Global

AICPA: FN Measurement

 

 

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