Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2011, have been restated into U.S. dollars as follows:

Assuming the functional currency of the subsidiary is the local currency, what total should be included in Parker's consolidated balance sheet at December 31, 2011, for the above items?

Question

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2011, have been restated into U.S. dollars as follows:

Assuming the functional currency of the subsidiary is the local currency, what total should be included in Parker's consolidated balance sheet at December 31, 2011, for the above items?

Quizplus · Accepted Answer

To calculate the total to be included in Parker's consolidated balance sheet, we need to convert the restated amounts back into the local currency of the subsidiary.

For the retained earnings, we need to subtract the 2010 balance of 19,000 from the 2011 balance of 77,000, which gives us 58,000. Converting this to the local currency using the exchange rate of 0.65 gives us 89,230.

For the long-term debt, we need to convert the restated amount of 220,000 into the local currency using the exchange rate of 0.63, which gives us 138,600.

For the common stock, we need to convert the restated amount of 120,000 into the local currency using the exchange rate of 0.67, which gives us 80,400.

Adding these three amounts together, we get a total of 308,230 in the local currency. Converting this back into U.S. dollars using the exchange rate of 0.74 gives us $418,000, which is the correct answer.

Certain Balance Sheet Accounts of a Foreign Subsidiary of Parker