Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 10, Problem 4P
To determine
Identify the appropriate answer for the given statement from the given choices.
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A foreign subsidiary of Thun Corporation has one asset (inventory) and no liabilities. The functional currency for this subsidiary is the yuan. The inventory was acquired for 100,000 yuan when the exchange rate was $0.16 = 1 yuan. Consolidated statements are to be produced, and the current exchange rate is $0.12 = 1 yuan. Which of the following statements is true for the consolidated financial statements? Choose the correct.a. A remeasurement gain must be reported.b. A positive translation adjustment must be reported.c. A negative translation adjustment must be reported.d. A remeasurement loss must be reported.
Which of the following statements is true for the translation process using the current rate method?a. A translation adjustment can affect consolidated net income.b. Equipment is translated at the historical exchange rate in effect at the date of its purchase.c. A translation adjustment is created by the change in the relative value of a subsidiary’s monetary assets and monetary liabilities caused by exchange rate fluctuations.d. A translation adjustment is created by the change in the relative value of a subsidiary’s net assets caused by exchange rate fluctuations.
Stiff Sails Corporation, a U.S. company, operates a 100%-owned British subsidiary, SeaBeW
Corporation. The U.S. dollar is the functional currency of the subsidiary. Financial statements for the
subsidiary for the fiscal year-end December 31, 2024, are as follows:
Sales
Cost of Goods Sold
Beginning Inventory
Purchases
Cost of Goods Sold
Depreciation
B.
Goods Available For Sale
Less: Ending Inventory
Selling and Admin. Expenses
Income Taxes
Net Income
Current Assets
Cash
Accts. Rec.
Inventories
Required:
A.
SeaBeWe Corporation
Income Statement
155,000
171,000
285,000
611,000
SeaBeWe Corporation
Partial Balance Sheet
310,000
265,000
575,000
285,000
290,000
79,000
155,000
32,000
July 1, 2022
Jan. 1, 2024
June 30, 2024
Dec. 31, 2024
Average for 2024
1. Cost of Goods Sold.
2. Depreciation Expense.
3. Equipment.
Other Information:
1. Equipment costing 340,000 pounds was acquired July 1, 2022, and 38,000 was acquired June 30,
2024. Depreciation for the period was as follows:
Pounds
650,000…
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- ! Required information A Clarke Corporation subsidiary buys marketable equity securities and inventory on April 1, 2017, for 100,000 won each. It pays for both items on June 1, 2017, and they are still on hand at year-end. Inventory is carried at cost under the lower-of-cost-or-net realizable rule. Currency exchange rates for 1 won follow: January 1, 2017 April 1, 2017 June 1, 2017 December 31, 2017 $ 0.45 =1 won 0.46 =1 0.47 =1 %3D 0.49 = 1arrow_forwardYang Corporation starts a foreign subsidiary on January 1 by investing 20,000 rand. Yang owns all of the shares of the subsidiary’s common stock. The foreign subsidiary generates 40,000 rand of net income throughout the year and pays no dividends. The rand is the foreign subsidiary’s functional currency. Currency exchange rates for 1 rand are as follows:In preparing consolidated financial statements, what translation adjustment will Yang report at the end of the current year?a. $400 positive (credit).b. $1,000 positive (credit).c. $1,400 positive (credit).d. $2,400 positive (credit).arrow_forwardGains from remeasuring a foreign subsidiary's financial statements from the local currency, which is not the functional currency, into the parent company's currency should be reported as a : O a. part of continuing operations O b. other comprehensive income item O c. deferred credit O d. extraordinary item (net of tax)arrow_forward
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- Assume that Palm Company owns 100% of Wu Company which is located in China. Wu's functional currency is the U.S. dollar. On 1/1/X1, Wu Company acquired equipment for 100,000 yen when the exchange rate was $1.2 per yen. During year X1, Wu has recorded S-L depreciation of 10,000 yen based on a 10-year life. The 12/31/X1 exchange rate is $1.4 and the average exchange rate for the year was $1.3. Based on this information, Wu's depreciation expense should be reported at which of the following amounts on 12/31/X1?arrow_forwardRequired information A Clarke Corporation subsidiary buys marketable equity securities and inventory on April 1, 2017, for 100,000 won each. It pays for both items on June 1, 2017, and they are still on hand at year-end. Inventory is carried at cost under the lower-of-cost-or-net realizable rule. Currency exchange rates for 1 won follow: $ 0.45 January 1, 2017 April 1, 2017 June 1, 2017 December 31, 2017 =1 won 0.46 =1 0.47 =D1 0.49 =1arrow_forwardHughes Inc. has a wholly owned subsidiary in Canada that previously had been determined as having the Canadian dollar as its functional currency. Due to a recent restructuring, Hughes Inc.'s CFO believes that the functional currency of the Canadian company has changed to the U.S. dollar. A large cumulative translation adjustment related to the Canadian subsidiary is included in accumulated other comprehensive income on Hughes Inc.'s balance sheet. The CFO is unsure whether the cumulative translation adjustment should be removed from equity, and if so, to what other account it should be transferred. He also questions whether the change in functional currency qualifies as a change in accounting principle, which would require retrospective application of the temporal method in translating the Canadian subsidiary's financial statements. He wonders, for example, whether the Canadian subsidiary's nonmonetary assets need to be restated as if the temporal in applied in previous years.…arrow_forward
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