Exam 10: Translation of Foreign Currency Financial Statements

A subsidiary of Porter Inc., a U.S. company, was located in a foreign country. The functional currency of this subsidiary was the Stickle (§), the local currency where the subsidiary is located. The subsidiary acquired inventory on credit on November 1, 2012, for §120,000 that was sold on January 17, 2013 for §156,000. The subsidiary paid for the inventory on January 31, 2013. Currency exchange rates between the dollar and the Stickle were as follows: What amount would have been reported for this inventory in Porter's consolidated balance sheet at December 31, 2012?

Kennedy Company acquired all of the outstanding common stock of Hastie Company of Canada for U.S. $350,000 on January 1, 2013, when the exchange rate for the Canadian dollar (CAD) was U.S. $.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, 2013, Hastie's trial balance net income was translated at U.S. $25,000. The average exchange rate for the Canadian dollar during 2013 was U.S. $.68, and the 2013 year-end exchange rate was U.S. $.65. Kennedy's share of Hastie's net income for 2013 would be

Westmore Ltd., is a British subsidiary of a U.S. company. Westmore's functional currency is the pound sterling (≤). The following exchange rates were in effect during 2013: Westmore reported sales of ≤1,500,000 during 2013. What amount (rounded) would have been included for this subsidiary in calculating consolidated sales?

Under the current rate method, common stock would be translated at what rate?

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

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2013, have been restated into U.S. dollars as follows: Assuming the functional currency of the subsidiary is the U.S. dollar, what total should be included in Parker's consolidated balance sheet at December 31, 2013, for the above items?

Which accounts are translated using current exchange rates?

What is the justification for the remeasurement of foreign currency transactions?

In translating a foreign subsidiary's financial statements, which exchange rate does the current method require for the subsidiary's assets and liabilities?

Under the temporal method, property, plant & equipment would be remeasured at what rate?

Under the current rate method, depreciation expense would be translated at what rate?

Under the temporal method, how would cost of goods sold be remeasured?

When preparing a consolidating statement of cash flows, which of the following statements is false?

A subsidiary of Porter Inc., a U.S. company, was located in a foreign country. The functional currency of this subsidiary was the Stickle (§), the local currency where the subsidiary is located. The subsidiary acquired inventory on credit on November 1, 2012, for §120,000 that was sold on January 17, 2013 for §156,000. The subsidiary paid for the inventory on January 31, 2013. Currency exchange rates between the dollar and the Stickle were as follows: What amount would have been reported for cost of goods sold on Porter's consolidated income statement at December 31, 2013?

A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2013: The average exchange rate during 2013 was §1 = $.96. The beginning inventory was acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired when the exchange rate was §1 = $.90. The exchange rate at December 31, 2013 was §1 = $.84. At what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2013 U.S. dollar income statement?

Which method of remeasuring a foreign subsidiary's financial statements is correct?

A historical exchange rate for common stock of a foreign subsidiary is best described as