Accounting standards and procedures in the United States have a major influence on the translation exposure of U.S.-based MNCs. One such standardis the requirement that MNCs use a weighted average exchange rate when consolidating financial statements from foreign subsidiaries.Suppose that Canton Co. is a U.S.-based MNC with a foreign subsidiary in Germany, which deals in euros. The local earnings of this German subsidiaryover a two-year period are shown in the following table, along with the weighted average exchange rate of the euro.For each of the two years, enter the translated earnings for the German subsidiary (in dollars) in the last column of the table.PeriodYear 1Year 2Local Earnings of GermanSubsidiary(Euros, Millions)1010Weighted Average Exchange Rate ofTranslated U.S. Dollar Earnings of GermanSubsidiaryEuro(Dollars, Millions)$$$1.20$1.40Because of a change in the weighted average exchange rate of the euro, the translated earnings of the German subsidiary, in dollars,

Dear student, kindly below is an answer to your assignment, please follow it carefully for a clear…

Answered: Accounting standards and procedures in…

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter12: Managing Economic Exposure And Translation Exposure

Section: Chapter Questions

Problem 4ST

See similar textbooks

Similar questions

Suppose that Canton Co. is a U.S.-based MNC with a foreign subsidiary in Germany, which deals in euros. The local earnings of this German subsidia over a two-year period are shown in the following table, along with the weighted average exchange rate of the euro and the translated U.S. dollar earnings of the subsidiary. Period Year 1 Year 2 Local Earnings of German Subsidiary (Euros, Millions) 20 20 Translated U.S. Dollar Earnings of Weighted Average Exchange German Subsidiary Rate of Euro $1.20 $1.00 (Dollars, Millions) $24.00 $20.00 Suppose that Canton has no earnings from the U.S. and all of it's earnings come from the consolidated earnings from the German subsidiary. Also suppose that the price of Canton stock is approximately equal to the mean P/E ratio in the industry multiplied by Canton's EPS. With these assumptions, the Consolidated Earnings (Euros, Millions) Period EPS (based on 10 million shares) Mean P/E Ratio (Dollars, Valuation of Canton Stock Millions) Price Year 1 Year 2…
Which of the following is true? The component of the current account include direct foreign investment and portfolio investment. The transaction regarding an Australian consulting firm receiving AUD5 million (i.e., Australian 5 million dollars) for consulting services provided to a German company is recorded as a debit under the current account of Australia. The transaction regarding a U.S. citizen receiving an interest payment as a result of his investment in a bond of a British firm issued in the United Kingdom is recorded as a credit under the current account of U.S.. When the BOP (balance of payment) accounts are recorded correctly, by BOP identity, under purely floating exchange rate regime, BCA (balance of current accounts) + BKA (balance of capital accounts) = - BRA (Balance of official reserve accounts).
The controller of Pane Co. was preparing the company's financial statements. Pane had a wholly owned subsidiary in a foreign country that used the euro as its currency. At December 31, the exchange rate was $1 U.S. for 1.25 euro. The weighted-average exchange rate for the year was $1 U.S. for 1.50 euro. At December 31, the subsidiary had assets of 1 million euro and revenue for the year of 2 million euro. What amounts would assets and revenue translate for consolidation? Assets Revenue A. $666,666 $1,333,333 B. $666,666 $1,600,000 C. $800,000 $1,333,333 D. $800,000 $1,600,000
Companies such as Sime Darby, Maxis and Nestle carry out many transactions in foreign currencies and have foreign operations. The entities are required to apply MFRS 121 The Effects of Changes in Foreign Exchange Rates in translating the financial statements of foreign operations to include in the consolidated financial statements. Discuss the THREE (3) primary indicators/factors in determining the functional currency of a company in order to records its transactions and prepare the financial statements.
Explain how a German subsidiary’s year-end balance in retained earnings is expressed in dollars assuming that the euro is the functional currency.
Companies conducting business outside their country's borders are required to translate the results of its foreign subsidiaries into their home currency so those results can be combined into their financial reporting domestically. What are three general steps to the foreign translation process
Question: Avanti Corp has a complex international operation with subsidiaries in multiple countries. The company engages in various cross-border transactions, including intercompany sales, transfer pricing arrangements, and foreign currency transactions. As the company's chief accountant, how would you ensure compliance with international accounting standards and tax regulations while optimizing the company's tax efficiency and financial reporting accuracy?
Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows: Current Rates Historical Rates Accounts Receivable, current $200000 $220000 Accounts Receivable, long term 100000 110000 Land 50000 55000 Patents 80000 85000 Total $430000 $470000 This subsidiary’s functional currency is a foreign currency. What total should Orchid’s balance sheet include for the preceding items? Choose the correct.a. $430,000.b. $435,000.c. $440,000.d. $450,000
Which of the following factors are related to an ADR? Factor -1: An ADR is a certificate that represents ownership of a foreign stock. An ADR is typically created by a U.S. bank who buys stock in foreign corporations in their domestic currencies and places them in its vault. Factor - 2: The major attraction to U.S. investors is that ADRs are claims to foreign companies that trade on domestic (U.S.) exchanges and in dollars. A. Only Factor 1 is correct B.Only Factor 2 is correct C.Both Factors are correct D-Neither Factor is correct.
Looking for help with these two questions. 1. Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency, Canadian dollars.2. Translate the Canadian dollar functional currency financial statements into U.S. dollars so that Sendelbach can prepare consolidated financial statements.
Here is given a balance sheet of a North Macedonian subsidiary of a US parent company. Calculate translation gain or loss under current rate method if the exchange rate changes from 50 denar/US. dollar to 60 denar/U.S. dollar? (H denotes historical exchange rate, C denotes current exchange rate). Since Cumulative Translation Adjustment (CTA) Account is not zero at the beginning, you have also to calculate it before the devaluation happens. Balance Sheet Before Devaluation Exchange Rate (MKD) (MKD/USS) After Devaluation Exchange Rate (MKD/USS) Assets Маccdonian Denar Statement MKD 27,000,000 Translated Translated Ассounts Ассounts US Dollars US Dollars 49.00 (H) 50.00 (C) 48.00 (H) 50.00 (C) 49.00 (H) 60.00 (C) 48.00 (H) 60.00 (C) Cash Ассounts 151,200,000 Receivable 45.00 (H) 50.00 (C) 40.00 (H) 50.00 (C) 45.00 (H) 60.00 (C) 40.00 (H) 60.00 (C) Inventory 43,200,000 Net Plant and 86,400,000 Equipment Tntal MKD 307,800,000 Liabilities & Net Worth Ассounts 48.50 (H) 50.00 (C) 47.50 (H)…
Assuming that the functional currency of a foreign subsidiary is the local currency, which of the following accounts would be translated at the current rate on the Balance Sheet date (B/S Rate)? a.Additional Paid-In Capital b.Cost of Goods Sold c.Retained Earnings d.Allowance for Doubtful Accounts

SEE MORE QUESTIONS

Recommended textbooks for you

International Financial Management

Finance

ISBN:

9780357130698

Author:

Madura

Publisher:

Cengage

Financial Reporting, Financial Statement Analysis…

Finance

ISBN:

9781285190907

Author:

James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:

Cengage Learning

International Financial Management

Finance

ISBN:

9780357130698

Author:

Madura

Publisher:

Cengage

Financial Reporting, Financial Statement Analysis…

Finance

ISBN:

9781285190907

Author:

James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS