Ch10 Translation of Foreign Currency Test Bank Docx

Student name:__________

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
1) In accounting, the term translation refers to

A) The calculation of gains or losses from hedging transactions.
B) The calculation of exchange rate gains or losses on individual transactions in foreign currencies.
C) The procedure required to identify a company's functional currency.
D) The calculation of gains or losses from all transactions for the year.
E) A procedure to prepare a foreign subsidiary's financial statements for consolidation.

2) What is a company's functional currency?

A) The currency of the primary economic environment in which it operates.
B) The currency of the country where it has its headquarters.
C) The currency in which it prepares its financial statements.
D) The reporting currency of its parent for a subsidiary.
E) The currency it chooses to designate as such.

3) 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?

A) The temporal method.
B) The current rate method.
C) The current/noncurrent method.
D) The monetary/nonmonetary method.
E) The noncurrent rate method.

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

A) The exchange rate in effect when each asset or liability was acquired.
B) The average exchange rate for the current year.
C) A calculated exchange rate based on market value.
D) The exchange rate in effect as of the balance sheet date.
E) The exchange rate in effect at the start of the current year.

5) When using the current rate method, the translation adjustment from translating a foreign subsidiary's financial statements should be shown as

A) An asset or liability (depending on the balance) in the consolidated balance sheet.
B) A revenue or expense (depending on the balance) in the consolidated income statement.
C) A component of stockholders' equity in the consolidated balance sheet.
D) A component of cash flows from financing activities in the consolidated statement of cash flows.
E) An element of the notes which accompany the consolidated financial statements.

6) 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:

Oscar reported sales of £1,200,000 during 2021. What amount (rounded) would have been included for this subsidiary in calculating consolidated sales?

A) $1,896,000.
B) $1,956,000.
C) $1,872,000.
D) $769,231.
E) $750,000.

7) 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?

A) $187,500.
B) $192,308.
C) $474,000.
D) $468,000.
E) $480,000.

8) Levinson Co. established a subsidiary in Mexico on January 1, 2021. The subsidiary engaged in the following transactions during 2021:

Levinson concluded that the subsidiary's functional currency was the dollar. Exchange rates for 2021 were:

What amount of foreign exchange gain or loss would have been recognized in Levinson’s consolidated income statement for 2021?

A) $825,000 gain.
B) $685,000 gain.
C) $270,000 loss.
D) $570,000 loss.
E) $315,000 loss.

9) 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?

A) $1 = §0.50.
B) $1 = §0.46.
C) $1 = §0.47.
D) $1 = §0.44.
E) $1 = §0.48.

10) 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?

A) $121,500 increase in relative value of net assets.
B) $121,500 decrease in relative value of net assets.
C) $62,000 decrease in relative value of net assets.
D) $62,000 increase in relative value of net assets.
E) $58,500 increase in relative value of net assets.

11) 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?

A) $119,000 decrease in relative value of net assets.
B) $121,000 decrease in relative value of net assets.
C) $81,000 increase in relative value of net assets.
D) $59,000 decrease in relative value of net assets.
E) $170,000 increase in relative value of net assets.

12) Under the current rate method, which accounts are translated using current exchange rates?

A) All revenues and expenses.
B) All assets and liabilities.
C) Cash, receivables, and most liabilities.
D) All current assets and deferred income.
E) All stockholders’ equity.

13) Under the temporal method, which accounts are remeasured using current exchange rates?

A) All revenues and expenses.
B) All assets and liabilities.
C) Cash, receivables, and most liabilities.
D) All current assets and deferred income.
E) All stockholders’ equity.

14) For a foreign subsidiary that uses the U.S. dollar as its functional currency, what method is required to ready the financial statements for consolidation?

A) Current/Noncurrent Method.
B) Monetary/Nonmonetary Method.
C) Current Rate Method.
D) Temporal Method.
E) Indirect Method.

15) 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?

A) Most of the subsidiary's sales and purchases were with companies in the U.S.
B) Dilty's functional currency is the dollar and Dilty is the parent.
C) Dilty's other subsidiaries all had the dollar as their functional currency.
D) Generally accepted accounting principles require that the subsidiary's functional currency must be the dollar if consolidated financial statements are to be prepared.
E) Dilty is located in the U.S.

16) Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary's functional currency was the U.S. dollar.What must Dilty do to ready the subsidiary's financial statements for consolidation?

A) First translate, then remeasure them.
B) First remeasure, then translate them.
C) State all of the subsidiary's accounts in U.S. dollars using the exchange rate in effect at the balance sheet date.
D) Translate them.
E) Remeasure them.

17) Certain balance sheet accounts of a foreign subsidiary of the Crater Co. had been stated in U.S. dollars as follows:

If the subsidiary’s local currency is its functional currency, what total amount should be included in Crater’s balance sheet in U.S. dollars?

A) $688,000.
B) $687,000.
C) $665,000.
D) $679,000.
E) $696,000.

18) Certain balance sheet accounts of a foreign subsidiary of the Crater Co. had been stated in U.S. dollars as follows:

If the U.S. dollar is the functional currency of this subsidiary, what total amount should be included in Crater’s balance sheet in U.S. dollars?

A) $688,000.
B) $696,000.
C) $710,000.
D) $665,000.
E) $679,000.

19) A subsidiary of Dunder Inc., a U.S. company, was located in a foreign country. The functional currency of this subsidiary was the Stickle (§) which is the local currency where the subsidiary is located. The subsidiary acquired inventory on credit on November 1, 2020, for §160,000 that was sold on January 17, 2021 for §207,000. The subsidiary paid for the inventory on January 31, 2021. Currency exchange rates between the dollar and the Stickle were as follows:

What amount would have been reported for this inventory in Dunder’s consolidated balance sheet at December 31, 2020?

A) $35,200.
B) $33,600.
C) $38,400.
D) $40,000.
E) $43,200.

20) A subsidiary of Dunder Inc., a U.S. company, was located in a foreign country. The functional currency of this subsidiary was the Stickle (§) which is the local currency where the subsidiary is located. The subsidiary acquired inventory on credit on November 1, 2020, for §160,000 that was sold on January 17, 2021 for §207,000. The subsidiary paid for the inventory on January 31, 2021. Currency exchange rates between the dollar and the Stickle were as follows:

What amount would have been reported for cost of goods sold on Dunder’s consolidated income statement at December 31, 2021?

A) $33,600.
B) $35,200.
C) $38,400.
D) $40,000.
E) $43,200.

21) A U.S. company's foreign subsidiary had the following amounts in stickles (§) in 2021:

The average exchange rate during 2021 was §1 = $0.96. The beginning inventory was acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired when the exchange rate was §1 = $0.90. The exchange rate at December 31, 2021 was §1 = $0.84. Assuming that the foreign country had a highly inflationary economy, at what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2021 U.S. dollar income statement?

A) $11,253,600.
B) $11,577,600.
C) $11,649,600.
D) $11,613,600.
E) $11,523,600.

22) A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2021:

The average exchange rate during 2021 was §1 = $0.98. The beginning inventory was acquired when the exchange rate was §1 = $1.18. The ending inventory was acquired when the exchange rate was §1 = $0.92. The exchange rate at December 31, 2021 was §1 = $0.82. At what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2021 U.S. dollar income statement?

A) $21,240,000.
B) $16,560,000.
C) $17,640,000.
D) $14,760,000.
E) $17,110,800.

23) A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2021:

The average exchange rate during 2021 was §1 = $0.96. The beginning inventory was acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired when the exchange rate was §1 = $0.90. The exchange rate at December 31, 2021 was §1 = $0.84. Assuming that the foreign nation for the subsidiary had a highly inflationary economy, at what amount should that foreign subsidiary's purchases have been reflected in the 2021 U.S. dollar income statement?

A) $11,865,600.
B) $11,577,600.
C) $11,520,000.
D) $11,613,600.
E) $11,523,600.

24) An historical exchange rate for common stock of a foreign subsidiary is best described as

A) The rate at date of the acquisition business combination.
B) The rate when the common stock was originally issued for the acquisition transaction.
C) The average rate from date of acquisition to the date of the balance sheet.
D) The rate from the prior year's balances.
E) The January 1 exchange rate.

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

A) There is no translation adjustment.
B) There is a transaction loss.
C) There is a transaction gain.
D) There is a negative translation adjustment.
E) There is a positive translation adjustment.

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

A) There is no translation adjustment.
B) There is a transaction loss.
C) There is a transaction gain.
D) There is a negative translation adjustment.
E) There is a positive translation adjustment.

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

A) There is no translation adjustment.
B) There is a transaction loss.
C) There is a transaction gain.
D) There is a negative translation adjustment.
E) There is a positive translation adjustment.

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

A) There is no translation adjustment.
B) There is a transaction loss.
C) There is a transaction gain.
D) There is a negative translation adjustment.
E) There is a positive translation adjustment.

29) Which method of translating a foreign subsidiary's financial statements is correct if it is assumed that the parent’s net investment is exposed to foreign exchange risk?

A) Historical rate method.
B) Working capital method.
C) Current rate method.
D) Remeasurement.
E) Temporal method.

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

A) Historical rate method.
B) Working capital method.
C) Current rate method.
D) Translation.
E) Temporal method.

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

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

32) Under the current rate method, inventory at net realizable value would be translated for the balance sheet at what rate?

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

33) Under the temporal method, common stock would be remeasured at what rate?

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

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

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

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

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

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

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

37) Under the current rate method, retained earnings would be translated at what rate?

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

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

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

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

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

40) Under the temporal method, depreciation expense would be remeasured at what rate?

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

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

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) A single historical rate.
E) Historical rates.

42) Under the current rate method, how would cost of goods sold be translated?

A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.

43) Where is the translation adjustment reported in the parent company's financial statements?

A) Net loss in the income statement.
B) Cumulative translation adjustment as a deferred asset.
C) Cumulative translation adjustment as a deferred liability.
D) Accumulated other comprehensive income.
E) Retained earnings.

44) Where is the remeasurement gain or loss reported in the parent company's financial statements?

A) Net income/loss in the income statement.
B) Cumulative translation adjustment as a deferred asset.
C) Cumulative translation adjustment as a deferred liability.
D) Other comprehensive income.
E) Retained earnings.

45) A highly inflationary economy is defined as

A) Cumulative 5-year inflation in excess of 100%.
B) Cumulative 3-year inflation in excess of 100%.
C) Cumulative 5-year inflation in excess of 90%.
D) Cumulative 3-year inflation in excess of 90%.
E) Any country designated as a company operating in a third-world economy.

46) If a subsidiary is operating in a highly inflationary economy, how are the financial statements to be restated?

A) Historical rate.
B) Working capital rate.
C) Translation.
D) Temporal method.
E) Current rate.

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

A) Parent reports a cumulative translation adjustment from adjusting its investment account under the equity method.
B) Parent reports a gain or loss in net income from adjusting its investment account under the equity method.
C) Subsidiary's cumulative translation adjustment is carried forward to the consolidated balance sheet.
D) Subsidiary's income/loss is carried forward to the consolidated balance sheet.
E) All foreign currency gains/losses are eliminated in the consolidated income statement and balance sheet.

48) When preparing a consolidated statement of cash flows, which of the following statements is false?

A) All operating activity items are translated at an average exchange rate for the period.
B) A change in accounts receivable is translated using the current rate.
C) A change in long-term debt is translated using the historical rate at the date of the change.
D) Dividends paid are translated using the historical rate at the date of the payment.
E) All items follow translation rates used for the balance sheet and the income statement.

49) 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?

A) The cumulative translation adjustment included in the Investment in Subsidiary account is eliminated.
B) The excess of fair value over book value since the date of acquisition is revalued for the change in exchange rate.
C) The amount of equity income recognized by the parent in the current year is eliminated.
D) The allocations of excess of fair value over book value at the date of acquisition are eliminated.
E) The subsidiary's stockholders' equity accounts as of the beginning of the year are eliminated.

50) 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 the cost of goods sold for 2021 in U.S. dollars using the temporal method.

A) $376,650.
B) $387,750.
C) $388,800.
D) $400,950.
E) $409,050.

51) 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 the cost of goods sold for 2021 in U.S. dollars using the current rate method.

A) $376,550.
B) $387,750.
C) $388,800.
D) $400,950.
E) $409,050.

52) 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 temporal method.

A) $13,950.
B) $14,100.
C) $14,400.
D) $14,850.
E) $15,150.

53) 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.

A) $13,950.
B) $14,100.
C) $14,400.
D) $14,850.
E) $15,150.

54) A foreign subsidiary uses the first-in first-out inventory method. The following inventory balances are given at December 31, 2021 in local currency units (LCU):

The following exchange rates are given for 2021:

Compute the December 31, 2021, inventory balance using the lower of cost or net realizable value method under the temporal method.

A) $321,000.
B) $457,600.
C) $596,400.
D) $454,400.
E) $419,000.

55) A foreign subsidiary uses the first-in first-out inventory method. The following inventory balances are given at December 31, 2021 in local currency units (LCU):

The following exchange rates are given for 2021:

Compute the December 31, 2021, inventory balance using the current rate method.

A) $454,400.
B) $457,600.
C) $596,400.
D) $419,000.
E) $321,000.

56) Perez Company, a Mexican subsidiary of a U.S. company, sold equipment costing 200,000 pesos with accumulated depreciation of 75,000 pesos for 140,000 pesos on March 1, 2021. The equipment was purchased on January 1, 2020. Relevant exchange rates for the peso are as follows:

The financial statements for Perez are translated by its U.S. parent. What amount of gain or loss would be reported in its translated income statement?

A) $1,530.
B) $1,575.
C) $1,590.
D) $1,090.
E) $1,650.

57) Perez Company, a Mexican subsidiary of a U.S. company, sold equipment costing 200,000 pesos with accumulated depreciation of 75,000 pesos for 140,000 pesos on March 1, 2021. The equipment was purchased on January 1, 2020. Relevant exchange rates for the peso are as follows:

The financial statements for Perez are remeasured by its U.S. parent. What amount of gain or loss would be reported in its translated income statement?

A) $1,530.
B) $1,575.
C) $1,590.
D) $1,090.
E) $1,650.

58) Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2021, 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, 2021, for the above items?

A) $407,500.
B) $418,000.
C) $396,000.
D) $403,500.
E) $398,500.

59) Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2021, have been restated into U.S. dollars as follows:

Assuming the functional currency of the subsidiary is the local currency, what total should be included in Parker's consolidated balance sheet at December 31, 2021, for the above items?

A) $407,500.
B) $418,000.
C) $396,000.
D) $403,500.
E) $398,500.

60) Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2021, have been restated into U.S. dollars as follows:

If the current rate used to restate these amounts is $0.95, what was the average historical rate used to arrive at the total amount for historical rates?

A) $0.9000.
B) $1.0000.
C) $0.9500.
D) $0.9474.
E) $1.0556.

61) 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.Calculate the U.S. dollar amount allocated to the patent at January 1, 2021.

A) $50,000.
B) $35,000.
C) $34,000.
D) $32,500.
E) $28,200.

62) 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.Amortization of the patent, translated, for 2021 would be

A) $7,000.
B) $10,000.
C) $6,800.
D) $9,000.
E) $6,500.

63) 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.Compute the amount of the patent reported in the consolidated balance sheet at December 31, 2021.

A) $28,200.
B) $25,700.
C) $35,000.
D) $27,200.
E) $26,000.

64) 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

A) $18,000.
B) $15,000.
C) $18,200.
D) $16,000.
E) $18,500.

65) 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 Euro; compute the U.S. income statement amount for sales for 2021.

A) $364,000.
B) $372,000.
C) $380,000.
D) $360,000.
E) $404,000.

66) 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 Euro; compute the U.S. balance sheet amount for inventory at December 31, 2021.

A) $18,800.
B) $19,600.
C) $18,000.
D) $20,200.
E) $19,000.

67) 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 Euro; compute the U.S. balance sheet amount for equipment for 2021.

A) $81,900.
B) $90,900.
C) $83,700
D) $88,200.
E) $85,500.

68) 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 Euro; compute the U.S. Statement of Retained Earnings amount reported for Dividends in 2021.

A) $19,000.
B) $20,200.
C) $18,600.
D) $19,400.
E) $19,600.

69) 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 Euro; compute the U.S. balance sheet amount for accumulated depreciation for 2021.

A) $40,950.
B) $41,850.
C) $45,450.
D) $42,750.
E) $44,100.

70) 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 Euro; compute the U.S. income statement amount for depreciation expense for 2021.

A) $8,190.
B) $8,370.
C) $8,820.
D) $9,090.
E) $8,550.

71) 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. income statement amount for sales for 2021.

A) $364,000.
B) $372,000.
C) $380,000.
D) $360,000.
E) $404,000.

72) 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.

A) $18,800.
B) $19,600.
C) $18,000.
D) $20,200.
E) $19,000.

73) 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 equipment for 2021.

A) $81,900.
B) $90,900.
C) $83,700.
D) $88,200.
E) $85,500.

74) 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. statement of retained earnings amount for dividends for 2021.

A) $19,000.
B) $20,200.
C) $18,600.
D) $19,400.
E) $19,600.

75) 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 accumulated depreciation for 2021.

A) $40,950.
B) $41,850.
C) $45,450.
D) $42,750.
E) $44,100.

76) 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. income statement amount for depreciation expense for 2021.

A) $8,190.
B) $8,370.
C) $8,820.
D) $9,090.
E) $8,550.

77) 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, 2018?

A) $29,500.
B) $28,500.
C) $30,000.
D) $12,000.
E) $11,800.

78) 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?

A) $42,600.
B) $44,800.
C) $45,500.
D) $42,300.
E) $41,500.

79) 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 total equipment owned by the subsidiary in Reynolds’s consolidated balance sheet at December 31, 2018?

A) $285,000.
B) $456,000.
C) $295,000.
D) $300,000.
E) $472,000.

80) 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 total equipment owned by the subsidiary in Reynolds’s consolidated balance sheet at December 31, 2020?

A) $480,000.
B) $487,000.
C) $520,000.
D) $512,000.
E) $489,000.

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
81) On January 1, 2021, Fandu Corp. began operations of a foreign subsidiary. On April 1, 2021, the subsidiary purchased inventory costing 150,000 stickles. One-fourth of this inventory remained unsold at the end of 2021 while 40% of the liability from the purchase had not yet been paid. The pertinent indirect exchange rates were:

Required:What should have been the December 31, 2021 inventory and accounts payable balances for this foreign subsidiary as translated into U.S. dollars? (Round your answers to the nearest whole dollar.)

82) On January 1, 2021, Veldon Co., a U.S. corporation with the U.S. dollar as its functional currency, established Malont Co. as a subsidiary. Malont is located in the country of Sorania, and its functional currency is the stickle (§). Malont engaged in the following transactions during 2021:

Malont’s operating revenues and expenses for 2021 were §800,000 and §650,000, respectively. The appropriate exchange rates were:

Required:Calculate the translation adjustment for Malont. (Round your answers to the nearest whole dollar.)

83) 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.

84) 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 statement of retained earnings for this subsidiary in stickles and then translate the amounts into U.S. dollars.

85) 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.

86) 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 statement of cash flows for this subsidiary in stickles and then translate the amounts into U.S. dollars.

87) Boerkian Co. started 2021 with two assets: Cash of §26,000 (Stickles) and Land that originally cost §72,000 when acquired on April 4, 2018. On May 1, 2021, the company rendered services to a customer for §36,000, an amount immediately paid in cash. On October 1, 2021, the company incurred an operating expense of §22,000 that was immediately paid. No other transactions occurred during the year so an average exchange rate is not necessary. Currency exchange rates were as follows:

Assume that Boerkian was a foreign subsidiary of a U.S. multinational company and the stickle (§) was the functional currency of the subsidiary. Calculate the translation adjustment for this subsidiary for 2021 and state whether this is a positive or a negative adjustment.

88) Boerkian Co. started 2021 with two assets: Cash of §26,000 (Stickles) and Land that originally cost §72,000 when acquired on April 4, 2018. On May 1, 2021, the company rendered services to a customer for §36,000, an amount immediately paid in cash. On October 1, 2021, the company incurred an operating expense of §22,000 that was immediately paid. No other transactions occurred during the year so an average exchange rate is not necessary. Currency exchange rates were as follows:

Assume Boerkian was a foreign subsidiary of a U.S. multinational company and the U.S. dollar was the functional currency of the subsidiary. Prepare a schedule of changes in the net monetary assets of Boerkian for the year 2021 and properly label the resulting gain or loss.

89) Boerkian Co. started 2021 with two assets: Cash of §26,000 (Stickles) and Land that originally cost §72,000 when acquired on April 4, 2018. On May 1, 2021, the company rendered services to a customer for §36,000, an amount immediately paid in cash. On October 1, 2021, the company incurred an operating expense of §22,000 that was immediately paid. No other transactions occurred during the year so an average exchange rate is not necessary. Currency exchange rates were as follows:

Required:Assume that Boerkian was a foreign subsidiary of a U.S. multinational company and the local currency of the subsidiary (stickle) is the functional currency. On the December 31, 2021 balance sheet, what was the translated value of the Land account?

90) Boerkian Co. started 2021 with two assets: Cash of §26,000 (Stickles) and Land that originally cost §72,000 when acquired on April 4, 2018. On May 1, 2021, the company rendered services to a customer for §36,000, an amount immediately paid in cash. On October 1, 2021, the company incurred an operating expense of §22,000 that was immediately paid. No other transactions occurred during the year so an average exchange rate is not necessary. Currency exchange rates were as follows:

Required:Assume that Boerkian was a foreign subsidiary of a U.S. multinational company and the U.S. dollar is the functional currency. On the December 31, 2021 balance sheet, what was the remeasured value of the Land account?

ESSAY. Write your answer in the space provided or on a separate sheet of paper.
91) A foreign subsidiary was acquired on January 1, 2021. Determine the exchange rate used to restate the following accounts at December 31, 2021. Land was purchased on October 1, 2021. Relevant exchange dates follow:(A) January 1, 2021(B) October 1, 2021(C) December 31, 2021(D) Average, 2021(E) Composite, using multiple dates.Identify the exchange rate used to translate items 1-5 when the functional currency is the foreign currency:Land.Equipment.Bonds payable.Common stock.Retained earnings.Identify the exchange rate used to remeasure the items 6-10 when the functional currency is the U.S. dollar:Land.Equipment.Bonds payable.Common stock.Retained earnings.

92) In translating a foreign subsidiary's financial statements, what exchange rate should be used for the subsidiary's revenues and expenses?

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

94) What exchange rate should be used to translate (a) revenues and expenses that occur throughout the year and (b) a gain or loss that occurs on a specific day?

95) Perkle Co. owned a subsidiary in Belgium; the subsidiary's functional currency was the Belgian franc. During 2021, Perkle engaged in hedging transactions to offset part of the subsidiary's net asset position. How should the effects of exchange rate fluctuations on the currency hedge be accounted for?

96) Under what circumstances would the remeasurement of a foreign subsidiary's financial statements be required?

97) A foreign subsidiary of a U.S. corporation purchased equipment on January 4, 2021.(A.) How would depreciation expense on the equipment be translated for 2021?(B.) How would depreciation expense on the equipment be remeasured for 2021?

98) What exchange rate would be used to translate the asset and liability account balances of a foreign subsidiary when the local currency is the functional currency? What justification can be given for using this exchange rate?

99) Farley Brothers, a U.S. company, had a subsidiary in Italy. Under what conditions would the U.S. dollar be considered the functional currency for this subsidiary?

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

101) Contrast the purpose of remeasurement with the purpose of translation.

102) What is the basic assumption underlying the current rate method?

103) What is the basic objective underlying the temporal method?

104) What are techniques that a parent company can use to hedge the balance sheet exposures of their foreign operations?