Transit Importing Company.converts its foreign subsidiary financial statements using the translation process.The company's French subsidiary reported the following for 2014: revenues and expenses of 10,500,000 and 6,505,000 francs,respectively,earned or incurred evenly throughout the year,dividends of 500,000 francs were paid during the year.The following exchange rates are available:

Translated net income for 2014 is

Question

Transit Importing Company.converts its foreign subsidiary financial statements using the translation process.The company's French subsidiary reported the following for 2014: revenues and expenses of 10,500,000 and 6,505,000 francs,respectively,earned or incurred evenly throughout the year,dividends of 500,000 francs were paid during the year.The following exchange rates are available:

Translated net income for 2014 is

Quizplus · Accepted Answer

To calculate the translated net income, we need to first convert the revenues and expenses into the reporting currency using the average exchange rate for the year. 
Revenues: 10,500,000 francs / 0.0070 = $1,500,000 
Expenses: 6,505,000 francs / 0.0070 = $929,285

Net Income = Revenues - Expenses - Dividends 
Net Income = $1,500,000 - $929,285 - $71,765 = $498,950

Finally, we need to translate this net income into the reporting currency using the current exchange rate. 
Translated net income = $498,950 x 0.85 = $424,103

Therefore, the best choice is B) $838,950.