Exam 14: Foreign Currency Financial Statements

A U.S.parent corporation loans funds to a foreign subsidiary to be used to purchase equipment.The loan is denominated in U.S.dollars and the functional currency of the subsidiary is the euro.This intercompany transaction is a foreign currency transaction of

Assume the functional currency of a foreign entity is the U.S.dollar,but the books are kept in euros.The objective of remeasurement of a foreign entity's accounts is to

Plane Corporation,a U.S.company,owns 100% of Shipp Corporation,a Libyan company.Shipp's equipment was acquired on the following dates (amounts are stated in Libyan dinars): Jan.01,2014 Purchased equipment for 40,000 dinars Jul.01,2014 Purchased equipment for 80,000 dinars Jan.01,2015 Purchased equipment for 50,000 dinars Jul.01,2015 Sold equipment purchased on Jan.01,2014 for 35,000 dinars Exchange rates for the Libyan dinars on various dates are: Shipp's equipment has an estimated 5-year life with no salvage value and is depreciated using the straight-line method,calculating depreciation expense on a monthly basis.Shipp's functional currency is the U.S.dollar,but the company uses the Libyan dinar as its reporting currency. Required: 1.Determine the value of Shipp's equipment account on December 31,2015 in U.S.dollars. 2.Determine Shipp's depreciation expense for 2015 in U.S.dollars. 3.Determine the gain or loss from the sale of equipment on July 1,2015 in U.S.dollars.

The reporting currency is the currency in which the consolidated financial statements and the subsidiary financial statements are prepared.

The GAAP permits two methods for converting the foreign subsidiary's financial statements into U.S.dollars: temporal method and the fixed rate method.

On January 1,2014,Planet Corporation,a U.S.company,acquired 100% of Star Corporation of Bulgaria,paying an excess of 90,000 Bulgarian lev over the book value of Star's net assets.The excess was allocated to undervalued equipment with a three-year remaining useful life.Star's functional currency is the Bulgarian lev.Star's books are maintained in the functional currency.Exchange rates for Bulgarian lev for 2014 are: Required: 1.Determine the depreciation expense stated in U.S.dollars on the excess allocated to equipment for 2014. 2.Determine the unamortized excess allocated to equipment on December 31,2014 in U.S.dollars. 3.If Star's functional currency was the U.S.dollar,what would be the depreciation expense on the excess allocated to the equipment for 2014?

Skillet Corporation,a British subsidiary of Pan Corporation (a U.S.company)was formed by Pan on January 1,2014 in exchange for all of the subsidiary's common stock.Skillet has now ended its second year of operations on December 31,2015.Relevant exchange rates are: January 01,2015 =1£= \ 1.60 December 31,2015 =1£= \ 1.75 2015 average rate =1£= \ 1.73 Skillet's adjusted trial balance is presented below for the calendar year 2015.The amount of equity adjustment carried over from 2014 is a credit balance of $41,250 (in dollars). $\text { In Pounds }$ Debits: Cash £75,000 Accounts receivable 362,000 Inventory 41,000 Building 400,000 Land 100,000 Depreciation expense 10,000 Other expenses 133,000 Cost of goods sold Total debits Credits Accumulated depreciation £17,500 Accounts payable 154,750 Common stock 450,000 Retained earnings 262,500 Sales revenue Total credits £1,501,000 Required: For Skillet's second year of operations,prepare the: 1.Translation working papers; 2.Translated income statement; and 3.Translated balance sheet.

Which of the following foreign subsidiary accounts will have the same value on consolidated financial statements,regardless of whether the statements are remeasured or translated?

Plate Corporation,a U.S.company,acquired ownership of Saucer Corporation of Switzerland on January 1,2014 for $1,500,000 when Saucer's stockholders' equity in Swiss francs (SF)consisted of 700,000 SF Capital Stock and 300,000 SF Retained Earnings.The exchange rate for Swiss francs was $1.20 on January 1.All excess purchase cost was attributed to a Trademark that did not have a recorded book value.The trademark is to be amortized over 20 years. Saucer's functional currency is Swiss francs and the records are kept in the same currency.A summary of changes in Saucer's stockholders' equity during 2014 and relevant exchange rates are as follows: Stockholders' equity Required: Determine the following: 1.Fair value of the Trademark from Plate's investment in Saucer on January 1,2014 in U.S.dollars. 2.Trademark amortization for 2014 in U.S.dollars. 3.Unamortized Trademark at December 31,2014 in U.S.dollars. 4.Equity adjustment from the Trademark in U.S.dollars. 5.Income from Saucer for 2014 in U.S.dollars. 6.Investment in Saucer balance at December 31,2014 in U.S.dollars.

Which of the following assets and/or liabilities are considered monetary?