2. Assume that a FARFAR subsidiary of the U.S. MNC operates in a highlyinflationary economy and keeps its balance sheet in FFAD currency. TheU.S. dollar is the reporting currency of the U.S. MNC. The following tablepresents the balance sheet in FAAD. The subsidiary is at the end of its firstyear of operation. The historical exchange rate is FAAD1.60/$1.00 and themost recent exchange rate is FAAD2.00/$1.00 while the weighted averageexchange rate is FAAD1.80/$1.00. The current price index is 105 at theacquisition date while the price index is 175 at the end of the reportingperiod. Fill out the missing entries for this FARFAR subsidiary underFASB52 of the GAAP and IAS 29 of the IFRS. (Hint: Inventory is carried atthe current value on the book)Balance Sheet1CashInventory (current Value =FAAD1,800)3Net fixed assets24Total Assets5Current liabilities6Long-term debt7Common stock8Retained earnings9Total L&ELocalCurrencyFFAD 2,100FAAD 1,500FAAD 3,000FAAD 6,600FAAD 1,200FAAD 1,800FAAD 2,700FAAD 900FAAD 6,600GAAPIFRSFASB52 IAS29

Cash:Given in FFAD: $2,100Using historical rate (FAAD1.60/$1.00): 2,100 / 1.60 = $1,312.50Using…

1Cash Inventory (current Value = ²FAAD1,800) 3Net fixed assets 2 4Total Assets 5Current liabilities 6Long-term debt 7Common stock 8Retained earnings 9Total L&E FFAD 2,100 FAAD 1,500 FAAD 3,000 FAAD 6,600 FAAD 1,200 FAAD 1,800 FAAD 2,700 FAAD 900 FAAD 6,600

1Cash Inventory (current Value = ²FAAD1,800) 3Net fixed assets 2 4Total Assets 5Current liabilities 6Long-term debt 7Common stock 8Retained earnings 9Total L&E FFAD 2,100 FAAD 1,500 FAAD 3,000 FAAD 6,600 FAAD 1,200 FAAD 1,800 FAAD 2,700 FAAD 900 FAAD 6,600

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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