Translation of Foreign Currency Financial Statements
Showing posts with label Translation of Foreign Currency Financial Statements. Show all posts
Showing posts with label Translation of Foreign Currency Financial Statements. Show all posts

A U.S. company's foreign subsidiary had the following amounts in stickles (§) in 2009:

A U.S. company's foreign subsidiary had the following amounts in stickles (§) in 2009:

The average exchange rate during 2009 was §1 = $.96. The beginning inventory was acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired when the exchange rate was §1 = $.90. The exchange rate at December 31, 2009 was §1 = $.84. Assuming that the foreign country had a highly inflationary economy, at what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2009 U.S. dollar income statement? 

Answer. $11,613,600


A subsidiary of Porter Inc., a U.S. company, was located in a foreign country. The functional currency of this subsidiary was the stickle (§). The subsidiary acquired inventory on credit on November 1, 2008, for §120,000 that was sold on January 17, 2009 for §156,000. The subsidiary paid for the inventory on January 31, 2009. Currency exchange rates between the dollar and the stickle were as follows:

A subsidiary of Porter Inc., a U.S. company, was located in a foreign country. The functional currency of this subsidiary was the stickle (§). The subsidiary acquired inventory on credit on November 1, 2008, for §120,000 that was sold on January 17, 2009 for §156,000. The subsidiary paid for the inventory on January 31, 2009. Currency exchange rates between the dollar and the stickle were as follows:


1. What figure would have been reported for this inventory on Porter's consolidated balance sheet at December 31, 2008? 

Answer. $24,000

2. What figure would have been reported for cost of goods sold on Porter's consolidated income statement at December 31, 2009? 

Answer. $28,800

Certain balance sheet accounts of a foreign subsidiary of the Tulip Co. had been stated in U.S. dollars as follows:

Certain balance sheet accounts of a foreign subsidiary of the Tulip Co. had been stated in U.S. dollars as follows:


1. 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?
C. $602,000

2. If the U.S. dollar is the functional currency of this subsidiary, what total should have been included in Tulip's balance sheet for the items above?
E. $616,000

Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary's functional currency was the U.S. dollar.

Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary's functional currency was the U.S. dollar.

1. Which one of the following statements would justify this conclusion? 

Answer. Most of the subsidiary's sales and purchases were with companies in the U.S.

2. What must Dilty do to ready the subsidiary's financial statements for consolidation? 

Answer. Re-measure them 

Darron Co. was formed on January 1, 2009 as a wholly owned foreign subsidiary of a U.S. corporation. Darron's functional currency was the stickle (§). The following transactions and events occurred during 2007

Darron Co. was formed on January 1, 2009 as a wholly owned foreign subsidiary of a U.S. corporation. Darron's functional currency was the stickle (§). The following transactions and events occurred during 2007:


1. Which of the following translation methods was originally mandated by SFAS No. 8? 

Answer. Temporal Method

2. Which accounts are re-measured using current exchange rates? 

Answer. All current assets and liabilities

3. For a foreign subsidiary that uses the U.S. dollar as its functional currency, what translation method is required? 

Answer. Temporal Method



What was the amount of the translation adjustment for 2009?

Darron Co. was formed on January 1, 2009 as a wholly owned foreign subsidiary of a U.S. corporation. Darron's functional currency was the stickle (§). The following transactions and events occurred during 2007:

What was the amount of the translation adjustment for 2009? 

Answer. $302,137 increase in relative value of net assets
 
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