Chapter 10-3 - appropriate. All assets (including...

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CHAPTER 10 TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS Answers to Problems 1. C 2. C 3. C 4. B Since the peso is the functional currency, the financial statements must be translated using the current rate method. Therefore, answers a and d can be eliminated. Because the subsidiary has a net asset position and the peso has appreciated from $.16 to $.19, a positive translation adjustment will result. 5. A All asset accounts are translated at current rates. 6. A Since the foreign currency is the functional currency, a translation is required. All assets accounts are translated at current rates. 7. C Since the U.S. dollar is the functional currency, a remeasurement is required. All receivables are remeasured at current rates. Assets carried at historical cost, such as prepaid insurance and goodwill, are remeasured at historical rates. 8. B The foreign currency is the functional currency, so a translation is
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Unformatted text preview: appropriate. All assets (including inventory) are translated at the current exchange rate [100,000 x $.17]. 9. C Cost of goods sold is translated at the exchange rate in effect at the date of accounting recognition, which is the date the goods were sold [100,000 x $.18]. 10. D The foreign currency is the functional currency, so a translation is appropriate. All assets are translated at the current exchange rate of $.19. 11. C The U.S. dollar is the functional currency, so a remeasurement is appropriate. Inventory (carried at cost) is remeasured at the historical exchange rate of $.16. Marketable equity securities (carried at market value) are remeasured at the current exchange rate of $.19. 12. C Beginning inventory FCU 200,000 x $1.00 = $ 200,000 Purchases 10,300,000 x $0.80 = 8,240,000 Ending inventory (500,000 ) x $0.75 = (375,000 ) Cost of goods sold FCU 10,000,000 $8,065,000...
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Chapter 10-3 - appropriate. All assets (including...

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