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

Quizplus · Accepted Answer

To calculate the gain or loss from translating Perez's financial statements, we need to use the following formula:

Translation gain or loss = (Ending rate - Beginning rate) x Net assets

In this case, the rate at the beginning of the year was $1.05 per euro, and the rate at the end of the year was $1.10 per euro. Therefore, the gain or loss would be:

(1.10 - 1.05) x €300,000 = €1,500

To convert this amount to U.S. dollars, we need to divide by the exchange rate at the end of the year:

€1,500 ÷ 1.10 = $1,590

Therefore, the answer is C: $1,590.

The Financial Statements for Perez Are Translated by Its U