Assume that U.S. parent company ABC has a subsidiary XYZ in Outer Mongolia. XYZ's total assets are as follows in Mongolian marks:

$ \begin{array}{ll}\text { Cash and receivables } & 500,000 \ \text { Inventory } & 500,000 \ \text { Fixed assets (net) } & 900,000\end{array} $
The relevant exchange rates are:
OMM 1.6800 closing rate on the balance sheet date
OMM 1.5500 exchange rate when the fixed assets were acquired
OMM 1.6300 average exchange rate for the period
OMM 1.6600 average exchange rate when ending inventory was acquired.
What is the total value of assets if the functional currency is the U.S. dollar?
A) $1,130,952
B) $1,179,469
C) $1,175,883
D) $1,185,012

Question

Assume that U.S. parent company ABC has a subsidiary XYZ in Outer Mongolia. XYZ's total assets are as follows in Mongolian marks:

$ \begin{array}{ll}\text { Cash and receivables } & 500,000 \ \text { Inventory } & 500,000 \ \text { Fixed assets (net) } & 900,000\end{array} $
The relevant exchange rates are:
OMM 1.6800 closing rate on the balance sheet date
OMM 1.5500 exchange rate when the fixed assets were acquired
OMM 1.6300 average exchange rate for the period
OMM 1.6600 average exchange rate when ending inventory was acquired.
What is the total value of assets if the functional currency is the U.S. dollar?
A) $1,130,952
B) $1,179,469
C) $1,175,883
D) $1,185,012

Quizplus · Accepted Answer

To calculate the total value of assets in U.S. dollars, we apply the appropriate exchange rates to each asset category based on their nature and the relevant accounting standards. - Cash and receivables are translated at the closing rate: $500,000 \div 1.6800 = \$297,619$- Inventory is translated at the rate when the ending inventory was acquired: $500,000 \div 1.6600 = \$301,205$- Fixed assets are translated at the historical rate (when they were acquired): $900,000 \div 1.5500 = \$580,645$Adding these together gives the total value of assets in U.S. dollars: \$297,619 + \$301,205 + \$580,645 = \$1,179,469.