a
Introduction: Translation adjustment is the most common method used and is applied when the local currency is the foreign entity’s functional currency. The subsidiary statement must be translated from its local currency to the parents’ functional currency. To translate the financial statements, the company will use the current rate, which is the exchange rate on balance sheet date, to convert the local currency.
The criteria P should use in determining the preparation of consolidated financial statements with C Ltd.
b
Introduction: Translation adjustment is the most common method used and is applied when the local currency is the foreign entity’s functional currency. The subsidiary statement must be translated from its local currency to the parents’ functional currency. To translate the financial statements, the company will use the current rate, which is the exchange rate on balance sheet date, to convert the local currency
The exchange rate to be used to translate the accounts balances, for the given accounts.
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Advanced Financial Accounting
- Christina Company (a U.S.-based company) has a subsidiary in Canada that began operations at the start of 2020 with assets of 139,000 Canadian dollars (CAD) and liabilities of CAD 68,000. During this initial year of operation, the subsidiary reported a profit of CAD 33,000. It distributed two dividends, each for CAD 5,700 with one dividend declared on March 1 and the other on October 1. Applicable U.S. dollar ($) exchange rates for 1 Canadian dollar follow: January 1, 2020 (start of business) $0.76 March 1, 2020 0.74 Weighted average rate for 2020 0.73 October 1, 2020 0.72 December 31, 2020 0.71 Assume that the Canadian dollar is this subsidiary’s functional currency. What translation adjustment would the company report for the year 2020? Assume that on October 1, 2020, Christina entered into a forward exchange contract to hedge the net investment in this subsidiary. On that date, the company agreed to sell CAD 270,000 in three months at a forward…arrow_forwardChristina Company (a U.S.-based company) has a subsidiary in Canada that began operations at the start of 2020 with assets of 143,000 Canadian dollars (CAD) and liabilities of CAD 76,000. During this initial year of operation, the subsidiary reported a profit of CAD 37,000. It distributed two dividends, each for CAD 6,100 with one dividend declared on March 1 and the other on October 1. Applicable U.S. dollar ($) exchange rates for 1 Canadian dollar follow: January 1, 2020 (start of business) March 1, 2020 Weighted average rate for 2020 October 1, 2020 December 31, 2020 $0.80 0.78 0.77 0.76 0.75 a. Assume that the Canadian dollar is this subsidiary's functional currency. What translation adjustment would the company report for the year 2020? b. Assume that on October 1, 2020, Christina entered into a forward exchange contract to hedge the net investment in this subsidiary. On that date, the company agreed to sell CAD 160,000 in three months at a forward exchange rate of $0.76/CAD1.…arrow_forward1. ForCo, a corporation that is incorporated in a foreign country that does not have a treaty with the United States, plans to conduct manufacturing, marketing, and sales operations in the United States. These U.S. operations produce $5 million of earnings & profits in Year 1. Assume further that the U.S. operations will have a net worth of $17 million at the beginning of Year 1 and $20 million at the end of Year 1. During Year 2, the U.S. branch does not produce any earnings & profits and its net worth is $20 million at the beginning of the year and $10 million at the end of the year. For branch profits tax purposes in Year 1, the dividend equivalent amount (“DEA”) for the U.S. branch is as follows: a. $1.5 million. b. $2.0 million c. $10 million. $20 million. d. $25 million. 2. For branch profits tax purposes in Year 2, the DEA for the U.S. branch is as follows: a. $2 million. b. $3 million. c. $10 million. d. $20 million. e. $25 million.…arrow_forward
- Christina Company (a U.S.-based company) has a subsidiary in Canada that began operations at the start of 2020 with assets of 142,000 Canadian dollars (CAD) and liabilities of CAD 74,000. During this initial year of operation, the subsidiary reported a profit of CAD 36,000. It distributed two dividends, each for CAD 6,000 with one dividend declared on March 1 and the other on October 1. Applicable U.S. dollar ($) exchange rates for 1 Canadian dollar follow: January 1, 2020 (start of business) $0.79 March 1, 2020 0.77 Weighted average rate for 2020 0.76 October 1, 2020 0.75 December 31, 2020 0.74 Compute the net translation adjustment the company will report in accumulated other comprehensive income for the year 2020 under this second set of circumstances. Assume that the Canadian dollar is this subsidiary’s functional currency. What translation adjustment would the company report for the year 2020?arrow_forwardChristina Company (a U.S.-based company) has a subsidiary in Canada that began operations at the start of 2020 with assets of 151,000 Canadian dollars (CAD) and liabilities of CAD 92,000. During this initial year of operation, the subsidiary reported a profit of CAD 45,000. It distributed two dividends, each for CAD 6,900 with one dividend declared on March 1 and the other on October 1. Applicable U.S. dollar ($) exchange rates for 1 Canadian dollar follow: January 1, 2020 (start of business) $0.77 March 1, 2020 0.75 Weighted average rate for 2020 0.74 October 1, 2020 0.73 December 31, 2020 0.72 Assume that the Canadian dollar is this subsidiary’s functional currency. What translation adjustment would the company report for the year 2020? Assume that on October 1, 2020, Christina entered into a forward exchange contract to hedge the net investment in this subsidiary. On that date, the company agreed to sell CAD 185,000 in three months at a forward…arrow_forwardDeere Company (DE) manufactures and distributes farm and construction machinery that it sells around the world. In addition to its manufacturing operations, Deeres credit division loans money to customers to finance the purchase of their farm and construction equipment. The following information is available for three recent years (in millions except per-share amounts): 1. Calculate the following ratios for each year. Round ratios and percentages to one decimal place, except for per-share amounts, which should be rounded to the nearest cent. a. Return on total assets b. Return on stockholders' equity c. Earnings per share d. Dividend yield e. Price-earnings ratio 2. Based on these data, evaluate Deeres profitability.arrow_forward
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- Telco Ltd. is a Danish telecom company that prepares consolidated financial statements in full compliance with IFRS 10. The company has expanded dramatically in Central Asia in recent years by investing in three units: K-Mobe, U-Mobe, and T-Mobe, supplying cellular service to customers in Kazakhstan, Uzbekistan, and Tajikistan, respectively. page 155Telco’s corporate investment policy is to take majority ownership stakes in overseas subsidiaries when possible, but to accept lower levels of ownership when majority ownership is not possible or practical. The investment structures of the three Central Asia units are as follows: Telco owns 45 percent of the voting shares of K-Mobe. The other shares are owned by local institutions: 30 percent are owned by an investment fund connected to the state-owned oil company, and 25 percent are owned by the municipal government of Almaty, Kazakhstan’s largest city. The legal documents establishing K-Mobe specify that Telco possesses the right to fill…arrow_forwardEuroco is a foreign corporation that manufactures watches for sale worldwide. Euroco markets its watches in the United States through a branch sales office located in Boston. During Year 1, Euroco’s effectively connected earnings and profits are $12 million, and its U.S. net equity is $24 million at the beginning of the year, and $16 million at the end of the year. In addition, Euroco’s interest expense recorded and paid by the U.S. branch was $1,760,000 of portfolio interest paid to an unrelated foreign corporation and $800,000 of interest paid to a foreign corporation which owns 15% of the combined voting power of Euroco’s stock. During Year 2, Euroco’s effectively connected earnings and profits are $20 million, and its U.S. net equity at the end of the year is $18 million. In addition, Euroco’s U.S. branch had recorded interest paid of $640,000 paid to a U.S. corporation. Euroco is not in a treaty country. What is Euroco’s branch profits tax, if any, for Year 2? a. $6,000,000…arrow_forwardcompeny,whose products are sold in 30 countries worldwide, is an integrated Canadian forest products company. compeny sells the majority of its lumber products in the United States and a significant amount of its pulp products in asia.Demon also has loans from other countries. For example, on June 18, 2018, the company borrowed US$160 million at an annual interest rate of 12%. compeny must repay this loan, and interest, in U.S.dollars One of the challenges global companies face is to make themselves attractive to investors from other currencies. This is difficult to do when different accounting rules in different countries blur the real impact of earnings. For example, in 2018 compenyreported a loss of $2.3 million, using a accounting rules.Had it reported under U.S. accounting rules, its loss would have been $12.1 million. Many companies that want to be more easily compared with U.S and other global competitors have switched to U,S. accounting principles. a National Railway.…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub