Suppose that Canton Co. is a U.S.-based MNC with a foreign subsidiary in Germany, which deals in euros. The local earnings of this German subsidiaover a two-year period are shown in the following table, along with the weighted average exchange rate of the euro and the translated U.S. dollarearnings of the subsidiary.PeriodYear 1Year 2Local Earnings of GermanSubsidiary(Euros, Millions)2020Translated U.S. Dollar Earnings ofWeighted Average ExchangeGerman SubsidiaryRate of Euro$1.20$1.00(Dollars, Millions)$24.00$20.00Suppose that Canton has no earnings from the U.S. and all of it's earnings come from the consolidated earnings from the German subsidiary. Alsosuppose that the price of Canton stock is approximately equal to the mean P/E ratio in the industry multiplied by Canton's EPS. With theseassumptions, theConsolidatedEarnings(Euros, Millions)PeriodEPS (based on 10 millionshares)Mean P/E Ratio(Dollars,Valuation of Canton StockMillions)PriceYear 1Year 2$24.00$20.00$2.4020$48.00$2.0020$40.00Because of ain the weighted average exchange rate of the euro, the valuation of Canton's stock price.

Step 1: Formula: Translated US $ earnings = Earning in Euros * Average Exchange rate for year…

Answered: Suppose that Canton Co. is a U.S.-based…

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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Recording Import Transactions Pinnacle Foods imports a variety of items for resale to U.S. retail‑ ers. Following is a description of purchases and foreign‑currency‑denominated payments made in the last accounting period, plus the direct exchange rates for each date: Country Amount Currency Spot rate at purchase Spot rate at payment Australia . . . . . . . . . . . . . . . . . . 200,000 Australian dollar $0.7600 $0.7300 Thailand . . . . . . . . . . . . . . . . . . 800,000 Baht 0.0345 0.0365 Hong Kong . . . . . . . . . . . . . . . . 5,000,000 Hong Kong dollar 0.1319 0.1362 Jordan . . . . . . . . . . . . . . . . . . . 500,000 Dinar 1.4100 1.3900 Required Prepare the journal entries made by Pinnacle, a U.S. company, to record the above purchase and payment transaction.
Last year, the Mexican peso/U.S. dollar exchange rate was MXN13.3872/$. Today, the exchange rate is MXN16.5307/$. A U.S. firm has total assets worth MXN14,790,000 located in Mexico that did not change in value over the year. What was the change in the value of the assets in dollars on the company's U.S. balance sheet? Multiple Choice −$193,736.57 $210,087.71 −$210,087.71 $0 $193,736.57
15.7A
Looking for help with these two questions. 1. Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency, Canadian dollars.2. Translate the Canadian dollar functional currency financial statements into U.S. dollars so that Sendelbach can prepare consolidated financial statements.
A U.S. company's foreign subsidiary had these amounts in local currency units (LCU) in 2024: Cost of goods sold Beginning inventory Ending inventory LCU 5,230,000 536,000 622,000 The average exchange rate during 2024 was $1.30 = LCU 1. The beginning inventory was acquired when the exchange rate was $1.10 = LCU 1. Ending inventory was acquired when the exchange rate was $1.40 LCU 1. The exchange rate on December 31, 2024, was $1.45 = LCU 1. Required: Assuming that the foreign country is highly inflationary, determine the amount at which the foreign subsidiary's cost of goods sold should be reflected in the U.S. dollar income statement. Cost of goods sold
On January 1, 2024, Trenten Systems, a U.S.-based company, purchased a controlling interest in Grant Management Consultants located in Zurich, Switzerland. The acquisition was treated as a purchase transaction. The 2024 financial statements stated in Swiss francs are given below. GRANT MANAGEMENT CONSULTANTS Comparative Balance Sheets January 1 and December 31, 2024 Direct exchange rates for Swiss franc are: Required: A. Translate the year-end balance sheet and income statement of foreign subsidiary using the current rate method of translation. B. Prepare a schedule to verify the translation adjustment. Cash and Receivables Net Property, Plant, and Equipment 40,000 37,000 60,000 92,000 30,000 32,000 20,000 20,000 10,000 40,000 60,000 92,000 Totals Accounts and Notes Payable Common Stock Retained Earnings Totals GRANT MANAGEMENT CONSULTANTS Consolidated Income and Retained Earnings Statement for the Year Ended December 31, 2024 Jan. 1 Dec. 31 20,000 55,000 Revenues 75,000 Operating…
A U.S.-based multinational company has two subsidiaries, one in Mexico (local currency, Mexicanpeso, MP) and one in Japan (local currency, yen, ¥). Forecasts of business operations indicate the following short-term financing position for each subsidiary (in equivalent U.S. dollars): Mexico:$80 million excess cash to be invested (lent) Japan: $60 million funds to be raised (borrowed) Currency Item US $ MP ¥ Spot exchange rates MP11.60/US$ ¥108.25/US$ Forecast percentage change −3.00% +1.50% Interest rates Nominal Euromarket 4.00% 6.20% 2.00% Domestic 3.75% 5.90% 2.15% Effective Euromarket Domestic Euromarket and the domestic market; then indicate where the funds should be invested and raised.…
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7. XYZ, a US company has a subsidiary in Korea. The Korean sub sells inventory to a Japanese company with the sale denominated in US dollars. Between the date of sale and the date the receivable is collected the Korean won strengthens 10% against the US dollar. Explain if there is a foreign exchange gain or loss or no FX impact and why Thank you
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