Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 11, Problem 1.3E
To determine
Cumulative translation adjustment:
A balance-sheet entry required of companies with foreign currency-based assets to provide greater transparency in their reporting. Assets acquired in a foreign currency are required to be reported at current exchange rates so that it reflects actual gain or losses.
: Computation of cumulative translation adjustment that is traceable to the year prior to 2015 by different approach.
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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
210,000
Inventory (bought on 3/1/20)
105,000
Equipment (bought on 1/1/19)
62,000
Rent expense
14,000
Dividends (declared on 10/1/20)
22,000
Notes receivable (to be collected in 2023)
37,000
Accumulated depreciation—equipment
18,600
Salary payable
5,200
Depreciation expense
6,200
The following U.S.$ per kuna exchange rates are applicable:
January 1, 2019
$0.20
Average for 2019
0.21
January 1, 2020
0.25
March 1, 2020
0.26
October 1, 2020
0.28
December 31, 2020
0.29
Average for 2020
0.27
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…
The comparative statements of Dubai Company are presented below.
All sales were on account. The allowance for doubtful accounts was $3,200 on December 31, 2017, and $3,000 on December 31, 2020.
Required:
Compute the following ratios for 2021. (Weighted average common shares in 2021 were 62,500.)
Times interest earned.
Asset turnover.
Debt to assets.
Yuehua Telecom Inc. and Guangxin Technology Ltd. are two competing ICT corporations based in Shenzhen Special Economic Zone, China. Both companies’ stocks are traded at Shenzhen Stock Exchange. The comparative financial statements of Yuehua and Guangxin for the last four years (2016 – 2019) are shown in the Attachments 1 and 2:
Instructions:
1. (A) Calculate the following ratios for each corporation for 2017, 2018, and 2019.
Current ratio
Sales to total assets ratio
Return on total assets ratio
Return on shareholders’ equity ratio
Gross profit ratio
Net profit ratio
Debt to equity ratio
Earnings per share
Price/earnings ratio
(B) Evaluate each company’s trends for sales, gross profit, and net income as disclosed on the comparative income statement.
2. What is your evaluation of the following?
The liquidity of each corporation.
Profitability.
The financial structure of each corporation.
The stock market’s perceptions of these companies.
3. Which corporation do you…
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