Lancer, Inc. (a U.S.-based company), establishes a subsidiary in Croatia on January 1, 2019. The following account balances for the year ending December 31, 2020, are stated in kuna (K), the local currency:         Sales K 330,000 Inventory (bought on 3/1/20)   181,500 Equipment (bought on 1/1/19)   86,000 Rent expense   22,000 Dividends (declared on 10/1/20)   28,000 Notes receivable (to be collected in 2023)   49,000 Accumulated depreciation—equipment   25,800 Salary payable   7,600 Depreciation expense   8,600     The following U.S.$ per kuna exchange rates are applicable:       January 1, 2019 $0.32 Average for 2019 0.33 January 1, 2020 0.37 March 1, 2020 0.38 October 1, 2020 0.40 December 31, 2020 0.41 Average for 2020 0.39     Lancer is preparing account balances to produce consolidated financial statements.   Assuming that the kuna is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements? Assuming that the U.S. dollar is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Lancer, Inc. (a U.S.-based company), establishes a subsidiary in Croatia on January 1, 2019. The following account balances for the year ending December 31, 2020, are stated in kuna (K), the local currency:

 

     
Sales K 330,000
Inventory (bought on 3/1/20)   181,500
Equipment (bought on 1/1/19)   86,000
Rent expense   22,000
Dividends (declared on 10/1/20)   28,000
Notes receivable (to be collected in 2023)   49,000
Accumulated depreciation—equipment   25,800
Salary payable   7,600
Depreciation expense   8,600
 

 

The following U.S.$ per kuna exchange rates are applicable:

 

   
January 1, 2019 $0.32
Average for 2019 0.33
January 1, 2020 0.37
March 1, 2020 0.38
October 1, 2020 0.40
December 31, 2020 0.41
Average for 2020 0.39
 

 

Lancer is preparing account balances to produce consolidated financial statements.

 

  1. Assuming that the kuna is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?

  2. Assuming that the U.S. dollar is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?

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