Deck 8: Translation of Foreign Currency Financial Statements

Question 1

A subsidiary of Porter Inc., a U.S. company, was located in a foreign country. The functional currency of this subsidiary was the Stickle (§), the local currency where the subsidiary is located. The subsidiary acquired inventory on credit on November 1, 2012, for §120,000 that was sold on January 17, 2013 for §156,000. The subsidiary paid for the inventory on January 31, 2013. Currency exchange rates between the dollar and the Stickle were as follows: What amount would have been reported for this inventory in Porter's consolidated balance sheet at December 31, 2012?

A)$24,000.
B)$26,400.
C)$22,800.
D)$27,600.
E)$28,800.

Answer 1

A
Explanation: §120,000 × $.20 = $24,000

Question 2

Which accounts are remeasured using current exchange rates?

A)all revenues and expenses.
B)all assets and liabilities.
C)cash, receivables, and most liabilities.
D)all current assets and liabilities.
E)all noncurrent assets and liabilities.

Answer 2

C

Question 3

In accounting, the term translation refers to

A)the calculation of gains or losses from hedging transactions.
B)the calculation of exchange rate gains or losses on individual transactions in foreign currencies.
C)the procedure required to identify a company's functional currency.
D)the calculation of gains or losses from all transactions for the year.
E)a procedure to prepare a foreign subsidiary's financial statements for consolidation.

Answer 3

E

Question 4

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 2013: $\begin{array}{ll}\text { Jan. } 1 & £ 1=\$ 1.60 \\\text { June } 30 & £ 1=\$ 1.64 \\\text { Dec. 31 } & £ 1=\$ 1.61 \\\text { Weighted average rate for the year } & £ 1=\$ 1.59\end{array}$ On December 31, 2013, Westmore had accounts receivable of £280,000. What amount (rounded) would have been included for this subsidiary in calculating consolidated accounts receivable?

A)$173,913.
B)$176,100.
C)$445,200.
D)$448,000.
E)$450,800.

Question 5

Darron Co. was formed on January 1, 2013 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 2013: What was the amount of the translation adjustment for 2013?

A)$52,000 decrease in relative value of net assets.
B)$60,800 decrease in relative value of net assets.
C)$61,200 decrease in relative value of net assets.
D)$466,400 increase in relative value of net assets.
E)$26,000 increase in relative value of net assets.

Question 6

A subsidiary of Porter Inc., a U.S. company, was located in a foreign country. The functional currency of this subsidiary was the Stickle (§), the local currency where the subsidiary is located. The subsidiary acquired inventory on credit on November 1, 2012, for §120,000 that was sold on January 17, 2013 for §156,000. The subsidiary paid for the inventory on January 31, 2013. Currency exchange rates between the dollar and the Stickle were as follows: What amount would have been reported for cost of goods sold on Porter's consolidated income statement at December 31, 2013?

A)$24,000.
B)$26,400.
C)$22,800.
D)$27,600.
E)$28,800.

Question 7

For a foreign subsidiary that uses the U.S. dollar as its functional currency, what method is required to ready the financial statements for consolidation?

A)Current/Noncurrent Method.
B)Monetary/Nonmonetary Method.
C)Current Rate Method.
D)Temporal Method.
E)Indirect Method.

Question 8

Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary's functional currency was the U.S. dollar. Which one of the following statements would justify this conclusion?

A)Most of the subsidiary's sales and purchases were with companies in the U.S.
B)Dilty's functional currency is the dollar and Dilty is the parent.
C)Dilty's other subsidiaries all had the dollar as their functional currency.
D)Generally accepted accounting principles require that the subsidiary's functional currency must be the dollar if consolidated financial statements are to be prepared.
E)Dilty is located in the U.S.

Question 9

Sinkal Co. was formed on January 1, 2013 as a wholly owned foreign subsidiary of a U.S. corporation. Sinkal's functional currency was the stickle (§). The following transactions and events occurred during 2013: What was the amount of the translation adjustment for 2013?

A)$52,000 decrease in relative value of net assets.
B)$60,800 decrease in relative value of net assets.
C)$61,200 decrease in relative value of net assets.
D)$466,400 increase in relative value of net assets.
E)$26,000 increase in relative value of net assets.

Question 10

Darron Co. was formed on January 1, 2013 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 2013: What exchange rate should have been used in translating Darron's revenues and expenses for 2013?

A)$1 = §.48.
B)$1 = §.44.
C)$1 = §.46.
D)$1 = §.42.
E)$1 = §.45.

Question 11

According to U.S. GAAP for a local currency perspective, which method is usually required for translating a foreign subsidiary's financial statements into the parent's reporting currency?

A)the temporal method.
B)the current rate method.
C)the current/noncurrent method.
D)the monetary/nonmonetary method.
E)the noncurrent rate method.

Question 12

Which accounts are translated using current exchange rates?

A)all revenues and expenses.
B)all assets and liabilities.
C)cash, receivables, and most liabilities.
D)all current assets and liabilities.
E)all noncurrent assets and liabilities.

Question 13

The translation adjustment from translating a foreign subsidiary's financial statements should be shown as

A)an asset or liability (depending on the balance) in the consolidated balance sheet.
B)a revenue or expense (depending on the balance) in the consolidated income statement.
C)a component of stockholders' equity in the consolidated balance sheet.
D)a component of cash flows from financing activities in the consolidated statement of cash flows.
E)an element of the notes which accompany the consolidated financial statements.

Question 14

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

A)$609,000.
B)$658,000.
C)$602,000.
D)$630,000.
E)$616,000.

Question 15

Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary's functional currency was the U.S. dollar. What must Dilty do to ready the subsidiary's financial statements for consolidation?

A)first translate them, then remeasure them.
B)first remeasure them, then translate them.
C)state all of the subsidiary's accounts in U.S. dollars using the exchange rate in effect at the balance sheet date.
D)translate them.
E)remeasure them.

Question 16

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 2013: Westmore reported sales of £1,500,000 during 2013. What amount (rounded) would have been included for this subsidiary in calculating consolidated sales?

A)$2,415,000.
B)$2,400,000.
C)$2,385,000.
D)$943,396.
E)$931,677.

Question 17

Gunther Co. established a subsidiary in Mexico on January 1, 2013. The subsidiary engaged in the following transactions during 2013: What amount of foreign exchange gain or loss would have been recognized in Gunther's consolidated income statement for 2013?

A)$800,000 gain.
B)$760,000 gain.
C)$320,000 loss.
D)$280,000 loss.
E)$440,000 loss.

Question 18

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

A)$609,000.
B)$658,000.
C)$602,000.
D)$630,000.
E)$616,000.

Question 19

In translating a foreign subsidiary's financial statements, which exchange rate does the current method require for the subsidiary's assets and liabilities?

A)the exchange rate in effect when each asset or liability was acquired.
B)the average exchange rate for the current year.
C)a calculated exchange rate based on market value.
D)the exchange rate in effect as of the balance sheet date.
E)the exchange rate in effect at the start of the current year.

Question 20

What is a company's functional currency?

A)the currency of the primary economic environment in which it operates.
B)the currency of the country where it has its headquarters.
C)the currency in which it prepares its financial statements.
D)the reporting currency of its parent for a subsidiary.
E)the currency it chooses to designate as such.

Question 21

Under the temporal method, inventory at market would be remeasured at what rate?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 22

A net asset balance sheet exposure exists and the foreign currency depreciates. Which of the following statements is true?

A)There is no translation adjustment.
B)There is a transaction loss.
C)There is a transaction gain.
D)There is a negative translation adjustment.
E)There is a positive translation adjustment.

Question 23

A net liability balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true?

A)There is no translation adjustment.
B)There is a transaction loss.
C)There is a transaction gain.
D)There is a negative translation adjustment.
E)There is a positive translation adjustment.

Question 24

A net liability balance sheet exposure exists and the foreign currency depreciates. Which of the following statements is true?

A)There is no translation adjustment.
B)There is a transaction loss.
C)There is a transaction gain.
D)There is a negative translation adjustment.
E)There is a positive translation adjustment.

Question 25

Under the current rate method, property, plant & equipment would be translated at what rate?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 26

Under the temporal method, depreciation expense would be remeasured at what rate?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 27

Under the temporal method, retained earnings would be remeasured at what rate?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 28

Under the current rate method, depreciation expense would be translated at what rate?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 29

Under the current rate method, common stock would be translated at what rate?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 30

Which method of translating a foreign subsidiary's financial statements is correct?

A)Historical rate method.
B)Working capital method.
C)Current rate method.
D)Remeasurement.
E)Temporal method.

Question 31

A historical exchange rate for common stock of a foreign subsidiary is best described as

A)The rate at date of the acquisition business combination.
B)The rate when the common stock was originally issued for the acquisition transaction.
C)The average rate from date of acquisition to the date of the balance sheet.
D)The rate from the prior year's balances.
E)The January 1 exchange rate.

Question 32

Under the current rate method, inventory at market would be translated at what rate?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 33

A U.S. company's foreign subsidiary had the following amounts in stickles (§) in 2013: The average exchange rate during 2013 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, 2013 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 2013 U.S. dollar income statement?

A)$11,253,600.
B)$11,577,600.
C)$11,649,600.
D)$11,613,600.
E)$11,523,600.

Question 34

Which method of remeasuring a foreign subsidiary's financial statements is correct?

A)Historical rate method.
B)Working capital method.
C)Current rate method.
D)Translation.
E)Temporal method.

Question 35

A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2013: $\begin{array}{lr}\text { Cost of goods sold } & \S 12,000,000 \\\text { Ending inventory } & 600,000 \\\text { Beginning inventory } & 240,000\end{array}$ The average exchange rate during 2013 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, 2013 was §1 = $.84. At what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2013 U.S. dollar income statement?

A)$11,253,600.
B)$11,577,600.
C)$11,520,000.
D)$11,613,600.
E)$11,523,600.

Question 36

A net asset balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true?

A)There is no translation adjustment.
B)There is a transaction loss.
C)There is a transaction gain.
D)There is a negative translation adjustment.
E)There is a positive translation adjustment.

Question 37

Under the temporal method, common stock would be remeasured at what rate?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 38

Under the temporal method, property, plant & equipment would be remeasured at what rate?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 39

Under the current rate method, retained earnings would be translated at what rate?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 40

A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2013: $\begin{array}{lr}\text { Cost of goods sold } & \S 12,000,000 \\\text { Ending inventory } & 600,000 \\\text { Beginning inventory } & 240,000\end{array}$ The average exchange rate during 2013 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, 2013 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 2013 U.S. dollar income statement?

A)$11,865,600.
B)$11,577,600.
C)$11,520,000.
D)$11,613,600.
E)$11,523,600.

Question 41

A foreign subsidiary uses the first-in first-out inventory method. The following inventory balances are given at December 31, 2013 in local currency units (LCU): Compute the December 31, 2013, inventory balance using the lower of cost or market method under the temporal method.

A)$429,000.
B)$457,600.
C)$596,400.
D)$568,000.
E)$426,000.

Question 42

Where is the disposition of a remeasurement gain or loss reported in the parent company's financial statements?

A)Net income/loss in the income statement.
B)Cumulative translation adjustment as a deferred asset.
C)Cumulative translation adjustment as a deferred liability.
D)Other comprehensive income.
E)Retained earnings.

Question 43

When consolidating a foreign subsidiary, which of the following statements is true?

A)Parent reports a cumulative translation adjustment from adjusting its investment account under the equity method.
B)Parent reports a gain or loss in net income from adjusting its investment account under the equity method.
C)Subsidiary's cumulative translation adjustment is carried forward to the consolidated balance sheet.
D)Subsidiary's income/loss is carried forward to the consolidated balance sheet.
E)All foreign currency gains/losses are eliminated in the consolidated income statement and balance sheet.

Question 44

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 2013: Compute the cost of goods sold for 2013 in U.S. dollars using the temporal method.

A)$376,650.
B)$387,750.
C)$388,800.
D)$400,950.
E)$409,050.

Question 45

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2013, have been restated into U.S. dollars as follows: $\begin{array}{lrr}&\text { Restated at }\\&\text { Current Rates } & \text { Historical Rates } \\\text { Cash } & \$ 47,500 & \$ 45,000 \\\text { Accounts receivable } & 95,000 & 90,000 \\\text { Inventory, at market } & 76,000 & 72,000 \\\text { Land } & 57,000 & 54,000 \\\text { Equipment (net) } & \underline{142,500} & 135,000 \\\quad \text { Total } & \$ 418,000 & \$ 396,000\end{array}$ 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?

A)$0.9000.
B)$1.0000.
C)$0.9500.
D)$0.9474.
E)$1.0556.

Question 46

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2013, have been restated into U.S. dollars as follows: $\begin{array}{lrr}&\text { Restated at }\\&\text { Current Rates } & \text { Historical Rates } \\\text { Cash } & \$ 47,500 & \$ 45,000 \\\text { Accounts receivable } & 95,000 & 90,000 \\\text { Inventory, at market } & 76,000 & 72,000 \\\text { Land } & 57,000 & 54,000 \\\text { Equipment (net) } & \underline{142,500} & 135,000 \\\quad \text { Total } & \$ 418,000 & \$ 396,000\end{array}$ 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, 2013, for the above items?

A)$407,500.
B)$418,000.
C)$396,000.
D)$403,500.
E)$398,500.

Question 47

Under the current rate method, how would cost of goods sold be translated?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.

Question 48

When preparing a consolidating statement of cash flows, which of the following statements is false?

A)All operating activity items are translated at an average exchange rate for the period.
B)A change in accounts receivable is translated using the current rate.
C)A change in long-term debt is translated using the historical rate at the date of the change.
D)Dividends paid are translated using the historical rate at the date of the payment.
E)All items follow translation rates used for the balance sheet and the income statement.

Question 49

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 2013: Compute the cost of goods sold for 2013 in U.S. dollars using the current rate method.

A)$376,550.
B)$387,750.
C)$388,800.
D)$400,950.
E)$409,050.

Question 50

Where is the disposition of a translation loss reported in the parent company's financial statements?

A)Net loss in the income statement.
B)Cumulative translation adjustment as a deferred asset.
C)Cumulative translation adjustment as a deferred liability.
D)Accumulated other comprehensive income.
E)Retained earnings.

Question 51

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 2013: Compute ending inventory for 2013 under the temporal method.

A)$13,950.
B)$14,100.
C)$14,400.
D)$14,850.
E)$15,150.

Question 52

If a subsidiary is operating in a highly inflationary economy, how are the financial statements to be restated?

A)Historical rate.
B)Working capital rate.
C)Translation.
D)Remeasurement.
E)Current rate.

Question 53

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?

A)The cumulative translation adjustment included in the Investment in Subsidiary account is eliminated.
B)The excess of fair value over book value since the date of acquisition is revalued for the change in exchange rate.
C)The amount of equity income recognized by the parent in the current year is eliminated.
D)The allocations of excess of fair value over book value at the date of acquisition are eliminated.
E)The subsidiary's stockholders' equity accounts as of the beginning of the year are eliminated.

Question 54

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, 2013. The equipment was purchased on January 1, 2012. Relevant exchange rates for the peso are as follows: $\begin{array}{lr}\text { January } 1,2012 & \$ .110 \\\text { March } 1,2013 & .106 \\\text { December } 31,2013 & .102 \\\text { Average, } 2013 & .105\end{array}$ 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?

A)$1,530.
B)$1,575.
C)$1,590.
D)$1,090.
E)$1,650.

Question 55

Under the temporal method, how would cost of goods sold be remeasured?

A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)A single historical rate.
E)A combination of historical rates.

Question 56

A highly inflationary economy is defined as

A)Cumulative 5-year inflation in excess of 100%.
B)Cumulative 3-year inflation in excess of 100%.
C)Cumulative 5-year inflation in excess of 90%.
D)Cumulative 3-year inflation in excess of 90%.
E)Any country designated as a company operating in a third-world economy.

Question 57

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, 2013. The equipment was purchased on January 1, 2012. Relevant exchange rates for the peso are as follows: $\begin{array}{lr}\text { January } 1,2012 & \$ .110 \\\text { March } 1,2013 & .106 \\\text { December } 31,2013 & .102 \\\text { Average, 2013 } & .105\end{array}$ 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?

A)$1,530.
B)$1,575.
C)$1,590.
D)$1,090.
E)$1,650.

Question 58

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2013, have been restated into U.S. dollars as follows: $\begin{array}{lrr}&\text { Restated at }\\&\text { Current Rates } & \text { Historical Rates } \\\text { Cash } & \$ 47,500 & \$ 45,000 \\\text { Accounts receivable } & 95,000 & 90,000 \\\text { Inventory, at market } & 76,000 & 72,000 \\\text { Land } & 57,000 & 54,000 \\\text { Equipment (net) } & \underline{142,500} & 135,000 \\\quad \text { Total } & \$ 418,000 & \$ 396,000\end{array}$ 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, 2013, for the above items?

A)$407,500.
B)$418,000.
C)$396,000.
D)$403,500.
E)$398,500.

Question 59

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 2013: Compute ending inventory for 2013 under the current rate method.

A)$13,950.
B)$14,100.
C)$14,400.
D)$14,850.
E)$15,150.

Question 60

A foreign subsidiary uses the first-in first-out inventory method. The following inventory balances are given at December 31, 2013 in local currency units (LCU): Compute the December 31, 2013, inventory balance using the current rate method.

A)$454,400.
B)$457,600.
C)$596,400.
D)$568,000.
E)$426,000.

Question 61

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?

Question 62

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

Question 63

Kennedy Company acquired all of the outstanding common stock of Hastie Company of Canada for U.S. $350,000 on January 1, 2013, 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, 2013, Hastie's trial balance net income was translated at U.S. $25,000. The average exchange rate for the Canadian dollar during 2013 was U.S. $.68, and the 2013 year-end exchange rate was U.S. $.65.
Calculate the U.S. dollar amount allocated to the patent at January 1, 2013.

A)$50,000.
B)$35,000.
C)$34,000.
D)$32,500.
E)$28,200.

Question 64

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the Euro; compute the U.S. income statement amount for depreciation expense for 2013.

A)$8,190.
B)$8,370.
C)$8,820.
D)$9,090.
E)$8,550.

Question 65

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for accumulated depreciation for 2013.

A)$40,950.
B)$41,850.
C)$45,450.
D)$42,750.
E)$44,100.

Question 66

Kennedy Company acquired all of the outstanding common stock of Hastie Company of Canada for U.S. $350,000 on January 1, 2013, 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, 2013, Hastie's trial balance net income was translated at U.S. $25,000. The average exchange rate for the Canadian dollar during 2013 was U.S. $.68, and the 2013 year-end exchange rate was U.S. $.65.
Compute the amount of the patent reported in the consolidated balance sheet at December 31, 2013.

A)$28,200.
B)$25,700.
C)$35,000.
D)$27,200.
E)$26,000.

Question 67

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for inventory, at cost, for 2013.

A)$18,800.
B)$19,600.
C)$18,000.
D)$20,200.
E)$19,000.

Question 68

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the U.S. Dollar; compute the U.S. statement of retained earnings amount for dividends for 2013.

A)$19,000.
B)$20,200.
C)$18,600.
D)$19,400.
E)$19,600.

Question 69

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the Euro; compute the U.S. balance sheet amount for inventory at December 31, 2013.

A)$18,800.
B)$19,600.
C)$18,000.
D)$20,200.
E)$19,000.

Question 70

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

Question 71

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the U.S. Dollar; compute the U.S. income statement amount for depreciation expense for 2013.

A)$8,190.
B)$8,370.
C)$8,820.
D)$9,090.
E)$8,550.

Question 72

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the Euro; compute the U.S. balance sheet amount for equipment for 2013.

A)$81,900.
B)$90,900.
C)$83,700.
D)$88,200.
E)$85,500.

Question 73

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the U.S. Dollar; compute the U.S. income statement amount for sales for 2013.

A)$364,000.
B)$372,000.
C)$380,000.
D)$360,000.
E)$404,000.

Question 74

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the Euro; compute the U.S. Statement of Retained Earnings amount reported for Dividends in 2013.

A)$19,000.
B)$20,200.
C)$18,600.
D)$19,400.
E)$19,600.

Question 75

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the Euro; compute the U.S. income statement amount for sales for 2013.

A)$364,000.
B)$372,000.
C)$380,000.
D)$360,000.
E)$404,000.

Question 76

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the Euro; compute the U.S. balance sheet amount for accumulated depreciation for 2013.

A)$40,950.
B)$41,850.
C)$45,450.
D)$42,750.
E)$44,100.

Question 77

Kennedy Company acquired all of the outstanding common stock of Hastie Company of Canada for U.S. $350,000 on January 1, 2013, 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, 2013, Hastie's trial balance net income was translated at U.S. $25,000. The average exchange rate for the Canadian dollar during 2013 was U.S. $.68, and the 2013 year-end exchange rate was U.S. $.65.
Amortization of the patent, translated, for 2013 would be

A)$7,000.
B)$10,000.
C)$6,800.
D)$9,000.
E)$6,500.

Question 78

Kennedy Company acquired all of the outstanding common stock of Hastie Company of Canada for U.S. $350,000 on January 1, 2013, 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, 2013, Hastie's trial balance net income was translated at U.S. $25,000. The average exchange rate for the Canadian dollar during 2013 was U.S. $.68, and the 2013 year-end exchange rate was U.S. $.65.
Kennedy's share of Hastie's net income for 2013 would be

A)$18,000.
B)$15,000.
C)$18,200.
D)$16,000.
E)$18,500.

Question 79

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. $\begin{array}{lr}\text { Sales } & € 400,000 \\\text { Inventory (bought on February 1, 2013) } & 20,000 \\\text { Equipment (bought on January 1, 2012) } & 90,000 \\\text { Dividends (paid on September 1, 2013) } & 20,000 \\\text { Accumulated depreciation - Equipment 12/31/13 } & 45,000 \\\text { Depreciation expense - Equipment, 2013 } & 9,000\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$
$\begin{array}{lr}\text { January 1, 2012 } & \$ .91 \\\text { January 1, 2013 } & .93 \\\text { February 1, 2013 } & .94 \\\text { September 1, 2013 } & .97 \\\text { December 31, 2013 } & 1.01 \\\text { 4 th quarter average, 2012 } & .90 \\\text { 4 th quarter average, 2013 } & .98 \\\text { Average, 2013 } & .95\end{array}$ Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for equipment for 2013.

A)$81,900.
B)$90,900.
C)$83,700.
D)$88,200.
E)$85,500.

Question 80

On January 1, 2013, 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 2013: Required:
Calculate the translation adjustment for Malont. (Round your answers to the nearest whole dollar.)