ACC401 chapter 13 test 1

Which of the following would be restated using the current exchange rate under the temporal method?

Inventory carried at market.

When translating foreign currency financial statements for a company whose functional currency is the U.S. dollar, which of the following accounts is translated using historical exchange rates?

Notes Payable, No; Equipment, Yes

If the functional currency is determined to be the U.S. dollar and its financial statements are prepared in the local currency, SFAS 52, requires which of the following procedures to be followed?

Remeasure the financial statements into U.S. dollars using the temporal method.

A wholly owned subsidiary of a U.S. parent company has certain expense accounts for the year ended December 31, 2017, stated in local currency units (LCU) as follows: LCU Depreciation of equipment (related assets were purchased January 1, 2015) 375,000 Provision for doubtful accounts 250,000 Rent 625,000 The exchange rates at various dates are as follows: Dollar equivalent LCU December 31, 2017 $0.50 Average for year ended December 31, 2017 0.55 January 1, 2015 0 .40 Assume that the LCU is the subsidiary's functional currency and that the charges to the expense accounts occurred approximately evenly during the year. What total dollar amount should be included in the translated income statement to reflect these expenses?

$687,500

A foreign subsidiary's functional currency is its local currency which has not experienced significant inflation. The weighted average exchange rate for the current year would be the appropriate exchange rate for translating:

Wages expense, Yes; Sales to customers, Yes

Under the temporal method, monetary assets and liabilities are translated by using the exchange rate existing at the

balance sheet date.

Paid-in capital accounts are translated using the historical exchange rate under:

both the current rate and temporal methods.

In preparing consolidated financial statements of a U.S. parent company and a foreign subsidiary, the foreign subsidiary's functional currency is the currency:

in which the subsidiary primarily generates and spends cash.

The translation adjustment that results from translating the financial statements of a foreign subsidiary using the current rate method should be:

included as a separate item in the stockholders' equity section of the balance sheet.

Which of the following would be restated using the average exchange rate under the temporal method?

none of these

Gains from remeasuring a foreign subsidiary's financial statements from the local currency, which is NOT the functional currency, into the parent company's currency should be reported as a(n):

part of continuing operations.

The objective of remeasurement is to:

produce the same results as if the books were maintained solely in the functional currency.