Question 1

REFERENCE: 8-05
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:
 $$\begin{array} { l l } 
\text { November 1, 2017 } & \$ .19 = \S 1 \
\text { December } 31.2017 & \$ .20 = \S 1 \
\text { January 1. 2018 } & \$ .22 = \S 1 \
\text { January 31. 2018 } & \$ .23 = \S 1 \
\text { Average for 2018 } & \$ .24 = \S 1
\end{array}$$
-What amount would have been reported for cost of goods sold on Porter's consolidated income statement at December 31,2018?

Accepted Answer

E

Question 2

In accounting,the term translation refers to

Accepted Answer

E

Question 3

When using the current rate method,the translation adjustment from translating a foreign subsidiary's financial statements should be shown as

Accepted Answer

C

Question 4

REFERENCE: 8-03
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?

Accepted Answer

The answer of REFERENCE: 8-03
Dilty Corp.owned a subsidiary in France.Dilty...

Question 5

REFERENCE: 8-04
Certain balance sheet accounts of a foreign subsidiary of the Tulip Co.had been stated in U.S.dollars as follows:
  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Stated at }$
$\begin{array}{llrr}
&&\text { Current } & \text { Historical } \
&&\text { Rates } & \text { Rates }\
\text { Accounts receivable } & - \text { current } & \$ 280,000 & \$ 308,000 \
\text { Accounts receivable } & - \text { long -term } & 140,000 & 154,000 \
\text { Prepaid insurance } & & 70,000 & 77,000 \
\text { Goodwill } & & 112,000 & 119,000\
\text { Totals }&& \$ 602,000 &\$ 658,000
\end{array}$ 
-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?

Accepted Answer

The answer of REFERENCE: 8-04
Certain balance sheet accounts of a...

Question 6

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

Accepted Answer

The current method requires the use of the exchange rate in effect as of the balance sheet date for the subsidiary's assets and liabilities. This is because the current method aims to reflect the financial position of the subsidiary at a specific point in time, which is the balance sheet date. Using the exchange rate at the balance sheet date ensures that the values reported in the translated financial statements reflect the most recent market conditions.

Question 7

REFERENCE: 8-01
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:
 $$\begin{array} { l l } 
\text { Jan. } 1 & £ 1 = \$ 1.60 \
\text { June 3C } & £ 1 = \$ 1.64 \
\text { Dec. 31 } & £ 1 = \$ 1.61 \
\text { Weighted average rate for the year } & £ 1 = \$ 1.59
\end{array}$$
-Westmore reported sales of £1,500,000 during 2018.What amount (rounded)would have been included for this subsidiary in calculating consolidated sales?

Accepted Answer

The answer of REFERENCE: 8-01
Westmore,Ltd.is a British subsidiary of a...

Question 8

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?

Accepted Answer

When the local currency is the functional currency, the current rate method is usually required for translating a foreign subsidiary's financial statements into the parent's reporting currency. This method uses the current exchange rate to translate all balance sheet and income statement items at the current rate at the date of translation.

Question 9

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?

Accepted Answer

The answer of For a foreign subsidiary that uses the...

Question 10

REFERENCE: 8-03
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?

Accepted Answer

The answer of REFERENCE: 8-03
Dilty Corp.owned a subsidiary in France.Dilty...

Question 11

REFERENCE: 8-04
Certain balance sheet accounts of a foreign subsidiary of the Tulip Co.had been stated in U.S.dollars as follows:
  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Stated at }$
$\begin{array}{llrr}
&&\text { Current } & \text { Historical } \
&&\text { Rates } & \text { Rates }\
\text { Accounts receivable } & - \text { current } & \$ 280,000 & \$ 308,000 \
\text { Accounts receivable } & - \text { long -term } & 140,000 & 154,000 \
\text { Prepaid insurance } & & 70,000 & 77,000 \
\text { Goodwill } & & 112,000 & 119,000\
\text { Totals }&& \$ 602,000 &\$ 658,000
\end{array}$ 
-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?

Accepted Answer

The answer of REFERENCE: 8-04
Certain balance sheet accounts of a...

Question 12

Under the current rate method,which accounts are translated using current exchange rates?

Accepted Answer

According to the current rate method, all assets and liabilities are translated using current exchange rates. Revenues, expenses, and stockholders' equity are not translated using current exchange rates under this method.

Question 13

REFERENCE: 8-01
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:
 $$\begin{array} { l l } 
\text { Jan. } 1 & £ 1 = \$ 1.60 \
\text { June 3C } & £ 1 = \$ 1.64 \
\text { Dec. 31 } & £ 1 = \$ 1.61 \
\text { Weighted average rate for the year } & £ 1 = \$ 1.59
\end{array}$$
-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?

Accepted Answer

The answer of REFERENCE: 8-01
Westmore,Ltd.is a British subsidiary of a...

Question 14

Under the temporal method,which accounts are remeasured using current exchange rates?

Accepted Answer

The answer of Under the temporal method,which accounts are remeasured...

Question 15

REFERENCE: 8-02
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:
 $\begin{array}{ll}
\text { Jan. } 1 & \text { Darron issued common stock for } \$ 1,000,000 . \
\text { June } 30 & \text { Darron paid dividends of } \S 20,000 . \
\text { Dec. } 31 & \text { Darron reported net income of } \S 80,000 \text { for the year }\
\
\text { Exchange rates for } 2018 \text { were: }\
\text { Jan. } 1 & \$ 1=\S .48 \
\text { June } 30 & \$ 1=\S .46 \
\text { Dec. } 31 & \$ 1=\S .42 \
\text { Weighted average rate for the year } & \$ 1=\$ .44 
\end{array}$ 
-What exchange rate should have been used in translating Darron's revenues and expenses for 2018?

Accepted Answer

The answer of REFERENCE: 8-02
Darron Co.was formed on January 1,2018...

Question 16

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?

Accepted Answer

The answer of Gunther Co.established a subsidiary in Mexico on...

Question 17

What is a company's functional currency?

Accepted Answer

The answer of What is a company's functional currency?
...

Question 18

REFERENCE: 8-05
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:
 $$\begin{array} { l l } 
\text { November 1, 2017 } & \$ .19 = \S 1 \
\text { December } 31.2017 & \$ .20 = \S 1 \
\text { January 1. 2018 } & \$ .22 = \S 1 \
\text { January 31. 2018 } & \$ .23 = \S 1 \
\text { Average for 2018 } & \$ .24 = \S 1
\end{array}$$
-What amount would have been reported for this inventory in Porter's consolidated balance sheet at December 31,2017?

Accepted Answer

The answer of REFERENCE: 8-05
A subsidiary of Porter Inc. ,a...

Question 19

REFERENCE: 8-02
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:
 $\begin{array}{ll}
\text { Jan. } 1 & \text { Darron issued common stock for } \$ 1,000,000 . \
\text { June } 30 & \text { Darron paid dividends of } \S 20,000 . \
\text { Dec. } 31 & \text { Darron reported net income of } \S 80,000 \text { for the year }\
\
\text { Exchange rates for } 2018 \text { were: }\
\text { Jan. } 1 & \$ 1=\S .48 \
\text { June } 30 & \$ 1=\S .46 \
\text { Dec. } 31 & \$ 1=\S .42 \
\text { Weighted average rate for the year } & \$ 1=\$ .44 
\end{array}$ 
-What was the amount of the translation adjustment for 2018?

Accepted Answer

The answer of REFERENCE: 8-02
Darron Co.was formed on January 1,2018...

Question 20

Sinkal Co.was formed on January 1,2018 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 2018:
$\begin{array}{ll}
\text { Jan. } 1 & \text {  Sinkal issued common stock for } \$ 1,000,000 . \
\text { June } 30 & \text {  Sinkal paid dividends of } \S 20,000 . \
\text { Dec. } 31 & \text { Sinkal reported net income of } \S 80,000 \text { for the year }\
\ 
\text { Exchange rates for } 2018 \text { were: }\
\text { Jan. } 1 & \S 1=\$ .42 \
\text { June } 30 & \S1=\$ .46 \
\text { Dec. } 31 & \S 1=\$ .48 \
\text { Weighted average rate for the year } & \$ 1=\$ .44 
\end{array}$

What was the amount of the translation adjustment for 2018?

Accepted Answer

The answer of Sinkal Co.was formed on January 1,2018 as...

Quiz 8: Translation of Foreign Currency Financial