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

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.

Quizplus · Accepted Answer

If the subsidiary's local currency is its functional currency, then the balance sheet accounts should be translated into U.S. dollars using the current exchange rate. Based on the exchange rates provided in the question, the correct translation of the balance sheet accounts is as follows:

Cash: $70,000 
Accounts receivable: $182,000 
Inventory: $196,000 
Plant and equipment: $110,000

The total amount in U.S. dollars is $558,000. Therefore, the correct answer is C ($602,000) which is not provided in the options.

Certain Balance Sheet Accounts of a Foreign Subsidiary of the Tulip