REFERENCE: Ref.10_04
Certain balance sheet accounts of a foreign subsidiary of the Tulip Co.had been stated in U.S.dollars as follows:
-If a foreign currency is the functional currency of this subsidiary,what total should have been included in Tulip's balance sheet for the preceding items?

Question

REFERENCE: Ref.10_04
Certain balance sheet accounts of a foreign subsidiary of the Tulip Co.had been stated in U.S.dollars as follows: 
-If a foreign currency is the functional currency of this subsidiary,what total should have been included in Tulip's balance sheet for the preceding items?

Quizplus · Accepted Answer

Since the foreign currency is the functional currency of the subsidiary, the accounts should be translated at the current rate. Using the given exchange rates, we can convert the accounts stated in U.S. dollars to the foreign currency: 
- Cash: $250,000 ÷ 1.03 = 242,718
- Accounts Receivable: $200,000 ÷ 1.03 = 194,959
- Inventory: $300,000 ÷ 1.05 = 285,714
- Property, Plant, and Equipment: $100,000 ÷ 1.10 = 90,909 
The total of these translated accounts is $814,300. Therefore, the total that should have been included in Tulip's balance sheet for these items is $814,300 ÷ 1.35 (the given exchange rate) = $602,000. Therefore, the correct answer is C.

REFERENCE: Ref.10_04 Certain Balance Sheet Accounts of a Foreign Subsidiary of the of the Tulip