When we translate a foreign subsidiary's balance sheet into U.S.dollars,we calculate a:

Question

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When translating a foreign subsidiary's balance sheet into U.S. dollars, we calculate a foreign currency translation gain or loss. This is because the translation process involves converting the foreign currency financial statement items into U.S. dollars, and any differences between the exchange rates at the transaction date and the balance sheet date can result in a gain or loss. Option A is incorrect because foreign currency transaction gains or losses arise from transactions denominated in a foreign currency, whereas here, we are concerned with converting the entire balance sheet. Option B is incorrect because a foreign exchange conversion rate is just the rate used to convert a foreign currency transaction into the domestic currency. Option D is incorrect because it is incomplete and does not capture the process of translation.

When We Translate a Foreign Subsidiary's Balance Sheet into U