K Corporation's branch operation in Sweden had net profits for 2012 of 300,000 Kronas.It received 30,000 Kronas from the branch at the end of each quarter.Assume that the exchange rates of Swedish Kronas per U.S.dollar were $$\begin{array} {lll }
1 / 1 / 2012 = 7.40 & 9 / 30 / 2012 = 7.60 \
3 / 31 / 2012 = 7.40 & 12 / 31 / 2012 = 7.60 \
6 / 30 / 2012 = 7.50 & 2012 \text { weighted } = 7.50
\end{array}$$ Under the profit and loss method, K Corporation reports branch profits of (the answer is rounded to the nearest dollar.)

Question

K Corporation's branch operation in Sweden had net profits for 2012 of 300,000 Kronas.It received 30,000 Kronas from the branch at the end of each quarter.Assume that the exchange rates of Swedish Kronas per U.S.dollar were $$\begin{array} {lll } 
1 / 1 / 2012  = 7.40 & 9 / 30 / 2012 = 7.60 \
3 / 31 / 2012  = 7.40 & 12 / 31 / 2012 = 7.60 \
6 / 30 / 2012  = 7.50 & 2012 \text { weighted } = 7.50
\end{array}$$ Under the profit and loss method, K Corporation reports branch profits of (the answer is rounded to the nearest dollar.)

Quizplus · Accepted Answer

Under the profit and loss method, the profits are translated at the weighted average exchange rate for the year. The net profits of 300,000 Kronas would be translated at the 2012 weighted average rate of 7.50 Kronas per U.S. dollar, resulting in $40,000 (300,000 / 7.50). However, the question states that K Corporation received 30,000 Kronas at the end of each quarter, which would be translated at the exchange rates in effect at those times. The remittances would be translated as follows: - 1st Quarter: 30,000 / 7.40 = $4,054.05- 2nd Quarter: 30,000 / 7.50 = $4,000.00- 3rd Quarter: 30,000 / 7.60 = $3,947.37- 4th Quarter: 30,000 / 7.60 = $3,947.37Total remittances in U.S. dollars = $4,054.05 + $4,000.00 + $3,947.37 + $3,947.37 = $15,948.79The net profits in U.S. dollars ($40,000) minus the total remittances ($15,948.79) gives the amount of profits reported under the profit and loss method: $24,051.21. However, this calculation does not align with the provided choices, indicating a misunderstanding in the calculation process.The correct approach is to directly convert the total net profits at the weighted average rate without subtracting the remittances, as they are part of the operational profits already. Therefore, the correct answer is based on converting the total net profits at the weighted average rate:300,000 Kronas / 7.50 = $40,000The discrepancy in the explanation indicates a misunderstanding of the question's requirements. The correct procedure is to use the weighted average rate for the entire year's profits, which directly leads to the answer without subtracting the remittances, as they are not relevant to the calculation under the profit and loss method for the purpose of this question. The correct answer, based on the information provided and the correct understanding of the profit and loss method, should be $40,000, but given the choices and the context, the closest correct choice provided is $39,949, indicating a possible rounding or calculation error in the question or answer choices.

K Corporation's Branch Operation in Sweden Had Net Profits for 2012