Chapter 10-5 - In most cases, average rate for the year is...

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CHAPTER 10 TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS Answers to Problems 21.(10 minutes) (Specify appropriate rates for a translation) Rent expense— use actual (historical) rate at time of recording. Rent expense would often be recorded evenly throughout the year so that an average rate for the period is acceptable. Dividends paid— use historical rate at time of recording, the date of declaration. Equipment— as an asset, use current rate at the balance sheet date. Notes payable— as a liability, use current rate at the balance sheet date. 21. (continued) Sales— use actual (historical) rate at time of recording. Sales often occur evenly throughout the year so that an average rate is acceptable. However, if sales are more prevalent at a particular time during the year, historical rates should be used. Depreciation expense— use historic rate at time of recording.
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Unformatted text preview: In most cases, average rate for the year is acceptable, because depreciation occurs evenly throughout the year. Depreciation is recorded at year-end only as a matter of convenience. Cash as an asset, use the current rate at the balance sheet date. Accumulated depreciation as a contra-asset account, use the current ex-change rate at the balance sheet date. Common stock as an equity account, use historic rate at time of recording, the date of issuance. 22.(5 minutes) (Determine translated values) As a translation, both the asset (inventory) and the liability (accounts payable) utilize the current exchange rate at the balance sheet date (December 31). Thus, the translated values are as follows: Inventory LCU120,000 x 25% left = LCU30,000 x 1/3.0 = $10,000 Accounts payable LCU120,000 x 40% unpaid = LCU48,000 x 1/3.0 = $16,000...
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This note was uploaded on 02/08/2012 for the course ACCOUNTING 559 taught by Professor Keating during the Spring '07 term at DeVry Addison.

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Chapter 10-5 - In most cases, average rate for the year is...

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