foreign currency

A foreign subsidiary uses the first-in first-out inventory method. The following inventory balances are given at December 31, 2013 in local currency units (LCU): Inventory at cost 320,000 LCU Inventory at replacement cost 300,000 Inventory at NRV 420,000 Inventory at NRV less normal profit margin 400,000 The following exchange rates are given for 2013: 4th quarter avg, 2013 $1.43 = 1 LCU Dec. 31, 2013 1.42 = 1 LCU Compute the December 31, 2013, inventory balance using the current rate method. A. $454,400. B. $457,600. C. $596,400. D. $568,000. E. $426,000.

A. $454,400.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the U.S. Dollar; compute the U.S. income statement amount for depreciation expense for 2013. A. $8,190. B. $8,370. C. $8,820. D. $9,090. E. $8,550.

A. $8,190.

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.

A. Most of the subsidiary's sales and purchases were with companies in the U.S.

Where is the disposition of a 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.

A. Net income/loss in the income statement.

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.

B. Average rate.

A 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.

B. The rate when the common stock was originally issued for the acquisition transaction.

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 liabilities. E. all noncurrent assets and liabilities.

B. all assets and liabilities.

Where is the disposition of a translation loss 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.

D. Accumulated other comprehensive income.

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.

D. There is a negative translation adjustment.

In translating a foreign subsidiary's financial statements, which exchange rate does the current 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.

D. the exchange rate in effect as of the balance sheet date.

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. A combination of historical rates.

E. A combination of historical rates.

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.

E. a procedure to prepare a foreign subsidiary's financial statements for consolidation.

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 them, then remeasure them. B. first remeasure them, 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.

E. remeasure them.

A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2013: COGS § 12,000,000 Ending Inventory 600,000 Beg. inventory 240,000 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? A. $11,253,600. B. $11,577,600. C. $11,520,000. D. $11,613,600. E. $11,523,600.

C. $11,520,000.

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 liabilities. E. all noncurrent assets and liabilities.

C. cash, receivables, and most liabilities.

Which of the following translation methods was originally mandated by SFAS No. 8? A) Current/Noncurrent Method. B) Monetary/Nonmonetary Method. C) Current Rate Method. D) Temporal Method. E) Indirect Method

D) Temporal Method.

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.

B. Average rate.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the Euro; compute the U.S. balance sheet amount for equipment for 2013. A. $81,900. B. $90,900. C. $83,700. D. $88,200. E. $85,500.

B. $90,900.

When preparing a consolidating 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.

B. A change in accounts receivable is translated using the current rate.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the U.S. Dollar; compute the U.S. income statement amount for sales for 2013. A. $364,000. B. $372,000. C. $380,000. D. $360,000. E. $404,000.

C. $380,000.

Sinkal Co. was formed on January 1, 2013 as a wholly owned foreign subsidiary of a U.S. corporation. Sinkal's functional currency was the stickle (§). The following transactions and events occurred during 2013: Jan 1 $1 = §.48 June 30 $1 = §.46 Dec. 31 $1 = §.42 W.A. $1 = §.44 What was the amount of the translation adjustment for 2013? A. $52,000 decrease in relative value of net assets. B. $60,800 decrease in relative value of net assets. C. $61,200 decrease in relative value of net assets. D. $466,400 increase in relative value of net assets. E. $26,000 increase in relative value of net assets.

B. $60,800 decrease in relative value of net assets.

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.

B. Cumulative 3-year inflation in excess of 100%.

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, 2013. The equipment was purchased on January 1, 2012. Relevant exchange rates for the peso are as follows: January 1, 2012 $.110 March 1, 2013 .106 Dec. 31, 2013 .102 Average, 2013 .105 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.

C. $1,590.

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, 2013. The equipment was purchased on January 1, 2012. Relevant exchange rates for the peso are as follows: January 1, 2012 $.110 March 1, 2013 .106 Dec. 31, 2013 .102 Average, 2013 .105 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.

D. $1,090.

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 2013: Beg. Inventory E 20,000 Purchases E 400,000 Ending Inventory E 15,000 Relevant exchange rates follow: 4th quarter avg, 2012 $.93 = E1 Dec. 31, 2012 .94 = E1 Average for 2013 .96 = E1 4th quarter avg, 2013 .99 = E1 Dec. 31, 2013 1.01 = E1 Compute ending inventory for 2013 under the temporal method. A. $13,950. B. $14,100. C. $14,400. D. $14,850. E. $15,150.

D. $14,850.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the Euro; compute the U.S. Statement of Retained Earnings amount reported for Dividends in 2013. A. $19,000. B. $20,200. C. $18,600. D. $19,400. E. $19,600.

D. $19,400.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the U.S. Dollar; compute the U.S. statement of retained earnings amount for dividends for 2013. A. $19,000. B. $20,200. C. $18,600. D. $19,400. E. $19,600.

D. $19,400.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the Euro; compute the U.S. balance sheet amount for inventory at December 31, 2013. A. $18,800. B. $19,600. C. $18,000. D. $20,200. E. $19,000.

D. $20,200.

Gunther Co. established a subsidiary in Mexico on January 1, 2013. The subsidiary engaged in the following transactions during 2013: Jan 1 1 peso = $.20 June 30 1 peso = $.19 Dec. 31 1 peso= $.16 W.A. 1 peso = $.18 What amount of foreign exchange gain or loss would have been recognized in Gunther's consolidated income statement for 2013? A. $800,000 gain. B. $760,000 gain. C. $320,000 loss. D. $280,000 loss. E. $440,000 loss.

D. $280,000 loss.

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.

D. Historical rate.

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.

D. Historical rate.

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.

D. Historical rate.

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.

D. Historical rate.

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. Remeasurement. E. Current rate.

D. Remeasurement.

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.

D. Temporal Method.

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.

D. The allocations of excess of fair value over book value at the date of acquisition are eliminated.

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.

D. There is a negative translation adjustment.

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 2013: Beg. Inventory E 20,000 Purchases E 400,000 Ending Inventory E 15,000 Relevant exchange rates follow: 4th quarter avg, 2012 $.93 = E1 Dec. 31, 2012 .94 = E1 Average for 2013 .96 = E1 4th quarter avg, 2013 .99 = E1 Dec. 31, 2013 1.01 = E1 Compute ending inventory for 2013 under the current rate method. A. $13,950. B. $14,100. C. $14,400. D. $14,850. E. $15,150.

E. $15,150.

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. Compute the amount of the patent reported in the consolidated balance sheet at December 31, 2013. A. $28,200. B. $25,700. C. $35,000. D. $27,200. E. $26,000.

E. $26,000.

A U.S. company's foreign subsidiary had the following amounts in stickles (§) in 2013: COGS § 12,000,000 Ending Inventory 600,000 Beg. inventory 240,000 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. 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 2013 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.

D. $11,613,600.

A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2013: COGS § 12,000,000 Ending Inventory 600,000 Beg. inventory 240,000 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. 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 2013 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.

A. $11,865,600.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for inventory, at cost, for 2013. A. $18,800. B. $19,600. C. $18,000. D. $20,200. E. $19,000.

A. $18,800.

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.

A. the currency of the primary economic environment in which it operates.

Darron Co. was formed on January 1, 2013 as a wholly owned foreign subsidiary of a U.S. corporation. Darron's functional currency was the stickle (§). The following transactions and events occurred during 2013: Jan 1 $1 = §.48 June 30 $1 = §.46 Dec. 31 $1 = §.42 W.A. $1 = §.44 What exchange rate should have been used in translating Darron's revenues and expenses for 2013? A. $1 = §.48. B. $1 = §.44. C. $1 = §.46. D. $1 = §.42. E. $1 = §.45.

B. $1 = §.44.

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. Calculate the U.S. dollar amount allocated to the patent at January 1, 2013. A. $50,000. B. $35,000. C. $34,000. D. $32,500. E. $28,200.

B. $35,000.

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 2013: Beg. Inventory E 20,000 Purchases E 400,000 Ending Inventory E 15,000 Relevant exchange rates follow: 4th quarter avg, 2012 $.93 = E1 Dec. 31, 2012 .94 = E1 Average for 2013 .96 = E1 4th quarter avg, 2013 .99 = E1 Dec. 31, 2013 1.01 = E1 Compute the cost of goods sold for 2013 in U.S. dollars using the temporal method. A. $376,650. B. $387,750. C. $388,800. D. $400,950. E. $409,050.

B. $387,750.

According to U.S. GAAP for a local currency perspective, 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.

B. the current rate method.

When translating Quadros' financial statements, which of the following statements is true? A) There will be a remeasurement gain reported on the consolidated income statement. B) There will be a remeasurement loss reported on the consolidated income statement. C) There will be a positive cumulative translation adjustment reported on the consolidated balance sheet. D) There will be a positive cumulative translation adjustment reported on the consolidated incomestatement. E) There will be a transaction gain reported on the consolidated income statement.

C) There will be a positive cumulative translation adjustment reported on the consolidated balance sheet.

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2013, have been restated into U.S. dollars as follows: current historical cash $ 47,500 45,000 AR 95,000 90,000 Inventory, at market 76,000 72,000 Land 57,000 54,000 Equipment 142,500 135,000 Totals 418,000 396,000 If the current rate used to restate these amounts is $.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.

A. $0.9000.

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: November 1, 2012 $.19 = §1 December 31, 2012 $.20 = §1 January 1, 2013 $.22 = §1 January 31, 2013 $.23 = §1 Average for 2013 $.24 = §1 What amount would have been reported for this inventory in Porter's consolidated balance sheet at December 31, 2012? A. $24,000. B. $26,400. C. $22,800. D. $27,600. E. $28,800.

A. $24,000.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for accumulated depreciation for 2013. A. $40,950. B. $41,850. C. $45,450. D. $42,750. E. $44,100.

A. $40,950.

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2013, have been restated into U.S. dollars as follows: current historical cash $ 47,500 45,000 AR 95,000 90,000 Inventory, at market 76,000 72,000 Land 57,000 54,000 Equipment 142,500 135,000 Totals 418,000 396,000 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? A. $407,500. B. $418,000. C. $396,000. D. $403,500. E. $398,500.

A. $407,500.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for equipment for 2013. A. $81,900. B. $90,900. C. $83,700. D. $88,200. E. $85,500.

A. $81,900.

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2013, have been restated into U.S. dollars as follows: current historical cash $ 47,500 45,000 AR 95,000 90,000 Inventory, at market 76,000 72,000 Land 57,000 54,000 Equipment 142,500 135,000 Totals 418,000 396,000 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, 2013, for the above items? A. $407,500. B. $418,000. C. $396,000. D. $403,500. E. $398,500.

B. $418,000.

A foreign subsidiary uses the first-in first-out inventory method. The following inventory balances are given at December 31, 2013 in local currency units (LCU): Inventory at cost 320,000 LCU Inventory at replacement cost 300,000 Inventory at NRV 420,000 Inventory at NRV less normal profit margin 400,000 The following exchange rates are given for 2013: 4th quarter avg, 2013 $1.43 = 1 LCU Dec. 31, 2013 1.42 = 1 LCU Compute the December 31, 2013, inventory balance using the lower of cost or market method under the temporal method. A. $429,000. B. $457,600. C. $596,400. D. $568,000. E. $426,000.

B. $457,600.

Darron Co. was formed on January 1, 2013 as a wholly owned foreign subsidiary of a U.S. corporation. Darron's functional currency was the stickle (§). The following transactions and events occurred during 2013: Jan 1 $1 = §.48 June 30 $1 = §.46 Dec. 31 $1 = §.42 W.A. $1 = §.44 What was the amount of the translation adjustment for 2013? A. $52,000 decrease in relative value of net assets. B. $60,800 decrease in relative value of net assets. C. $61,200 decrease in relative value of net assets. D. $466,400 increase in relative value of net assets. E. $26,000 increase in relative value of net assets.

B. $60,800 decrease in relative value of net assets.

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

C. $18,200.

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: Jan 1 E1 = $1.60 June 30 E1 = $1.64 Dec. 31 E1 = $1.61 W.A. E1 = $1.59 Westmore reported sales of ≤1,500,000 during 2013. What amount (rounded) would have been included for this subsidiary in calculating consolidated sales? A. $2,415,000. B. $2,400,000. C. $2,385,000. D. $943,396. E. $931,677.

C. $2,385,000.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the Euro; compute the U.S. income statement amount for sales for 2013. A. $364,000. B. $372,000. C. $380,000. D. $360,000. E. $404,000.

C. $380,000.

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 2013: Beg. Inventory E 20,000 Purchases E 400,000 Ending Inventory E 15,000 Relevant exchange rates follow: 4th quarter avg, 2012 $.93 = E1 Dec. 31, 2012 .94 = E1 Average for 2013 .96 = E1 4th quarter avg, 2013 .99 = E1 Dec. 31, 2013 1.01 = E1 Compute the cost of goods sold for 2013 in U.S. dollars using the current rate method. A. $376,550. B. $387,750. C. $388,800. D. $400,950. E. $409,050.

C. $388,800.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the Euro; compute the U.S. balance sheet amount for accumulated depreciation for 2013. A. $40,950. B. $41,850. C. $45,450. D. $42,750. E. $44,100.

C. $45,450.

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. Amortization of the patent, translated, for 2013 would be A. $7,000. B. $10,000. C. $6,800. D. $9,000. E. $6,500.

C. $6,800.

Certain balance sheet accounts of a foreign subsidiary of the Tulip Co. had been stated in U.S. dollars as follows: current historical AR - current 280,000 308,000 AR - LT 140,000 154,000 Prepaid Insurance 70,000 77,000 Goodwill 112,000 119,000 Totals 602,000 658,000 If the subsidiary's local currency is its functional currency, what total amount should be included in Tulip's balance sheet in U.S. dollars? A. $609,000. B. $658,000. C. $602,000. D. $630,000. E. $616,000.

C. $602,000.

Which method of translating a foreign subsidiary's financial statements is correct? A. Historical rate method. B. Working capital method. C. Current rate method. D. Remeasurement. E. Temporal method.

C. Current rate method.

Under the current rate method, inventory at market would be translated at what rate? A. Beginning of the year rate. B. Average rate. C. Current rate. D. Historical rate. E. Composite amount.

C. Current rate.

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.

C. Current rate.

Under the temporal method, inventory at market would be remeasured at what rate? A. Beginning of the year rate. B. Average rate. C. Current rate. D. Historical rate. E. Composite amount.

C. Current rate.

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.

C. Subsidiary's cumulative translation adjustment is carried forward to the consolidated balance sheet.

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.

C. a component of stockholders' equity in the consolidated balance sheet.

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: November 1, 2012 $.19 = §1 December 31, 2012 $.20 = §1 January 1, 2013 $.22 = §1 January 31, 2013 $.23 = §1 Average for 2013 $.24 = §1 What amount would have been reported for cost of goods sold on Porter's consolidated income statement at December 31, 2013? A. $24,000. B. $26,400. C. $22,800. D. $27,600. E. $28,800.

E. $28,800.

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: Jan 1 E1 = $1.60 June 30 E1 = $1.64 Dec. 31 E1 = $1.61 W.A. E1 = $1.59 On December 31, 2013, Westmore had accounts receivable of ≤280,000. What amount (rounded) would have been included for this subsidiary in calculating consolidated accounts receivable? A. $173,913. B. $176,100. C. $445,200. D. $448,000. E. $450,800.

E. $450,800.

Certain balance sheet accounts of a foreign subsidiary of the Tulip Co. had been stated in U.S. dollars as follows: current historical AR - current 280,000 308,000 AR - LT 140,000 154,000 Prepaid Insurance 70,000 77,000 Goodwill 112,000 119,000 Totals 602,000 658,000 If the U.S. dollar is the functional currency of this subsidiary, what total amount should be included in Tulip's balance sheet in U.S. dollars? A. $609,000. B. $658,000. C. $602,000. D. $630,000. E. $616,000.

E. $616,000.

Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1, 2012. Selected account balances are available for the year ended December 31, 2013, and are stated in Euro, the local currency. Assume the functional currency is the Euro; compute the U.S. income statement amount for depreciation expense for 2013. A. $8,190. B. $8,370. C. $8,820. D. $9,090. E. $8,550.

E. $8,550.

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.

E. Composite amount.

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.

E. Composite amount.

Which method of remeasuring a foreign subsidiary's financial statements is correct? A. Historical rate method. B. Working capital method. C. Current rate method. D. Translation. E. Temporal method.

E. Temporal method.

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.

E. There is a positive translation adjustment.

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.

E. There is a positive translation adjustment.