Sharp Company owns a Japanese subsidiary, whose functional currency is the U.S. dollar. On October 15, 20X5, when the rate of exchange was 121 yen to $1, the Japanese subsidiary declared and paid a dividend to Sharp of 24,000,000 yen. The dividend represented the net income of the foreign subsidiary for the six months ended June 30, 20X5, during which time the weighted average of exchange rates was 125 yen to $1. The rate of exchange in effect at December 31, 20X5, was 135 yen to $1. What rate of exchange should be used to translate the dividend for the December 31, 20X5 financial statements?
A)121 yen to $1
B)125 yen to $1
C)135 yen to $1
D)128 yen to $1

Question

Quizplus · Accepted Answer

Dividends are translated at the historical rate at the time the dividend was declared regardless of whether the current method or remeasurement method is used.

Sharp Company Owns a Japanese Subsidiary, Whose Functional Currency Is