Exam 10: Translation of Foreign Currency Financial Statements

Gale Co. was formed on January 1, 2021 as a wholly owned foreign subsidiary of a U.S. corporation. Gale's functional currency was the stickle (§). The following transactions and events occurred during 2021: Exchange rates for 2021 were: What was the amount of the translation adjustment for 2021?

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2020. Selected account balances are available for the year ended December 31, 2021, and are stated in Euro, the local currency. Relevant exchange rates for 1 Euro are given below: Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for inventory, at cost, for 2021.

Ginvold Co. began operating a subsidiary in a foreign country on January 1, 2021 by acquiring all of the common stock for §50,000 Stickles, the local currency. This subsidiary immediately borrowed §120,000 on a five-year note with ten percent interest payable annually beginning on January 1, 2022. A building was then purchased for §170,000 on January 1, 2021. This property had a ten-year anticipated life and no salvage value and was to be depreciated using the straight-line method. The building was immediately rented for three years to a group of local doctors for §6,000 per month. By year-end, payments totaling §60,000 had been received. On October 1, §5,000 were paid for a repair made on that date and it was the only transaction of this kind for the year. A cash dividend of §6,000 was transferred back to Ginvold on December 31, 2021. The functional currency for the subsidiary was the Stickle (§). Currency exchange rates were as follows: Prepare an income statement for this subsidiary in stickles and then translate these amounts into U.S. dollars.

Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary's functional currency was the U.S. dollar.Which one of the following statements would justify this conclusion?

Esposito is an Italian subsidiary of a U.S. company.Esposito's ending inventory is valued at the average cost for the last quarter of the year.The following account balances are available for Esposito for 2021: Relevant exchange rates follow: Compute ending inventory for 2021 under the current rate method.

Under the temporal method, retained earnings would be remeasured at what rate?

A net liability balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true?

Under the temporal method, inventory at net realizable value would be remeasured for the balance sheet at what rate?

Marshall Co. was formed on January 1, 2021 as a wholly owned foreign subsidiary of a U.S. corporation. Marshall's functional currency was the stickle (§). The following transactions and events occurred during 2021: Exchange rates for 2021 were: What was the amount of the translation adjustment for 2021?

Under the current rate method, property, plant & equipment would be translated at what rate?

A subsidiary of Reynolds Inc., a U.S. company, was located in a foreign country. The local currency of this subsidiary was the Euro (€) while the functional currency of this subsidiary was the U.S. dollar. The subsidiary acquired Equipment A on January 1, 2018, for €250,000. Depreciation expense associated with Equipment A was €25,000 per year. On January 1, 2020, the subsidiary acquired Equipment B for €150,000 and Equipment B had associated depreciation expense of €10,000. The subsidiary owned no other depreciable assets. Currency exchange rates between the U.S. dollar and the Euro were as follows: What amount would have been reported for depreciation expense related to the equipment owned by the subsidiary in Reynolds's consolidated balance sheet at December 31, 2020?

Gale Co. was formed on January 1, 2021 as a wholly owned foreign subsidiary of a U.S. corporation. Gale's functional currency was the stickle (§). The following transactions and events occurred during 2021: Exchange rates for 2021 were: What exchange rate should have been used in translating Gale's revenues and expenses for 2021?

How can a parent corporation determine the functional currency for a foreign subsidiary that conducts business in more than one country?

Oscar, Ltd. is a British subsidiary of a U.S. company. Oscar's functional currency is the pound sterling (£). The following exchange rates were in effect during 2021: On December 31, 2021, Oscar had accounts receivable of £300,000. What amount (rounded) would have been included for this subsidiary in calculating consolidated accounts receivable?

Kennedy Company acquired all of the outstanding common stock of Hastie Company of Canada for U.S. $350,000 on January 1, 2021, when the exchange rate for the Canadian dollar (CAD) was U.S. $0.70. The fair value of the net assets of Hastie was equal to their book value of CAD 450,000 on the date of acquisition. Any acquisition consideration excess over fair value was attributed to an unrecorded patent with a remaining life of five years. The functional currency of Hastie is the Canadian dollar.For the year ended December 31, 2021, Hastie's trial balance net income was translated at U.S. $25,000. The average exchange rate for the Canadian dollar during 2021 was U.S. $0.68, and the 2021 year-end exchange rate was U.S. $0.65.Kennedy's share of Hastie's net income for 2021 would be

Which method is used for remeasuring a foreign subsidiary's financial statements?

Ginvold Co. began operating a subsidiary in a foreign country on January 1, 2021 by acquiring all of the common stock for §50,000 Stickles, the local currency. This subsidiary immediately borrowed §120,000 on a five-year note with ten percent interest payable annually beginning on January 1, 2022. A building was then purchased for §170,000 on January 1, 2021. This property had a ten-year anticipated life and no salvage value and was to be depreciated using the straight-line method. The building was immediately rented for three years to a group of local doctors for §6,000 per month. By year-end, payments totaling §60,000 had been received. On October 1, §5,000 were paid for a repair made on that date and it was the only transaction of this kind for the year. A cash dividend of §6,000 was transferred back to Ginvold on December 31, 2021. The functional currency for the subsidiary was the Stickle (§). Currency exchange rates were as follows: Prepare a balance sheet for this subsidiary in stickles and then translate the amounts into U.S. dollars.

According to U.S. GAAP, when the local currency is the functional currency, which method is usually required for translating a foreign subsidiary's financial statements into the parent's reporting currency?

When consolidating a foreign subsidiary, which of the following statements is true?

When preparing a consolidation worksheet for a parent and its foreign subsidiary accounted for under the equity method, which of the following statements is false?