Hosgood Distributing Inc.converts its foreign subsidiary financial statements using the translation process.Their German subsidiary reported the following for 2014: revenues and expenses of 9,050,000 and 6,400,000 marks,respectively,earned or incurred evenly throughout the year,dividends of 2,000,000 marks were paid during the year.The following exchange rates are available: Translated net income for 2014 is

Question

Hosgood Distributing Inc.converts its foreign subsidiary financial statements using the translation process.Their German subsidiary reported the following for 2014: revenues and expenses of 9,050,000 and 6,400,000 marks,respectively,earned or incurred evenly throughout the year,dividends of 2,000,000 marks were paid during the year.The following exchange rates are available:  Translated net income for 2014 is

Quizplus · Accepted Answer

First, we need to convert the revenues and expenses from marks to dollars using the average exchange rate for the year:
Revenues: 9,050,000 marks ÷ 1.50 marks/dollar = $6,033,333
Expenses: 6,400,000 marks ÷ 1.45 marks/dollar = $4,413,793

Then, we can calculate the net income in dollars using the formula: Net Income = Revenues - Expenses - Dividends
Net Income = $6,033,333 - $4,413,793 - $1,333,333 = $286,207

Finally, we need to translate the net income from dollars to the reporting currency (presumably U.S. dollars) using the current exchange rate:
Net Income = $286,207 × 1.25 dollars/euro = $357,759

Therefore, the translated net income for 2014 is $715,500 (rounded to the nearest dollar).