If Maker is considered to be a self-sustaining foreign subsidiary (i.e., the functional currency of the foreign operation is different than the parent), what amount will be shown for amortization expense on its translated Canadian dollar financial statements as at December 31, 2017?
A) $32,500.
B) $34,510.
C) $34,775.
D)$34,938.

Question

Quizplus · Accepted Answer

Amortization expense for Maker will be calculated using the translated historical cost of the asset ($400,000 x 0.1094), which is $43,760. This amount will be amortized over the remaining useful life of the asset (5 years) resulting in an annual amortization expense of $8,752. This amount will then be translated into Canadian dollars using the December 31, 2017 exchange rate of $1.00 = $0.7954 resulting in amortization expense of $6,947. This amount will be added to Maker's operating expenses of $27,828 to arrive at total expenses of $34,775.

If Maker Is Considered to Be a Self-Sustaining Foreign Subsidiary