Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Question
Chapter 10, Problem 3P
To determine
Identify the appropriate answer for the given statement from the given choices.
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Students have asked these similar questions
Exchange differences arising from the translation of financial statements
of a foreign operation shall be accounted for as: (using the closing rate
method method)
Translation gain or loss as component of other comprehensive income
Translation gain or loss as component of profit or loss
As valuation adjustment on the company's retained earnings
O Netted to the balance of foreign exchange gain or loss
How should exchange gains or losses resulting from foreign currency transactions be accounted for?
Included as component of income from continuing operations for the period in which the rate changes.
Included as component of other comprehensive income for the period in which the rate changes.
Included in the statement of financial position as a deferred item.
Included in net earnings for gains, but deferred for losses.
In accordance with U.S. generally accepted accounting principles, which translation combination is appropriate for a foreign operation whose functional currency is the U.S. dollar? Choose the correct option.
Method
Treatmemt of transition adjustment
a.
Current rate
other comprehensive income
b.
Current rate
Gain or loss in net income
c.
Temporal
other comprehensive income
d.
Temporal
Gain or loss in net income
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- Explain the ‘qualifying asset’ and how do we treat exchange rate differences relating to the acquisition of qualifying assets? Compare and contrast this with the treatment for assets that are not qualifying assets?Give your answer as per AASB 123arrow_forwardRolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2019, the subsidiary had the following balance sheet (amounts are in thousands [000s]): Cash Inventory Land Building Accumulated depreciation 2020 Feb. 1 Paid 8,120,000 NGN on the note payable. May 1 Sold entire inventory for 17,200,000 NGN on account. June 1 Sold land for 6,120,000 NGN cash. 2011 2013 NGN 16,420 11, 200 4, 120 41,200 (20,600) NGN 52,340 The subsidiary acquired the inventory on August 1, 2019, and the land and building in 2013. It issued the common stock in 2011. During 2020, the following transactions took place: Aug. 1 Collected all accounts receivable. Sept. 1 Signed long-term note to receive 8,120,000 NGN cash. Oct. 1 Bought inventory for 20, 120,000 NGN cash. Nov. 1 Bought land for 3,120,000 NGN on account. Dec. 1 Declared and paid 3,120,000 NGN cash dividend to parent. Dec.31 Recorded depreciation for the entire year of 2,060,000 NGN.…arrow_forwardWhen translating the financial statements of an entity from its functional currency to its selected presentation currency, which of the following translation measurement is incorrect? Assets and liabilities are translated at the closing rate at the date of Statement of Financial Position. Income and expenses are translated at (1) exchange rates at the date of the transaction or (2) average rate for the period for practicality. Share capital accounts are translated at the date of the transaction resulting to that equity items. Retained earnings are translated using the average rate during the period.arrow_forward
- In accordance with U.S. generally accepted accounting principles, which translation combination is appropriate for a foreign operation whose functional currency is the U.S. dollar?arrow_forwardThe approach that identifies the relevant environmental factors and linking it with national accounting practices, an international grouping or pattern of development proposed is: а. Qualitative approach. b. Deductive Approach. С. Subjective approach. d. Inductive Approach. The forward rate in a forward contract: а. is said to be at a discount if it exceeds the spot rate at the inception of the contract. b. changes as the spot rate changes. С. None of the above are true. d. is the spot rate at the expiration date of the contract.arrow_forwardQuoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date are an example of: Select one: A. a Level 2 input. B. a Level 3 input. C. a Level 4 input. D. a Level 1 inputarrow_forward
- Gains from remeasuring a foreign subsidiary's financial statements from the local currency, which is not the functional currency, into the parent company's currency should be reported as a : O a. part of continuing operations O b. other comprehensive income item O c. deferred credit O d. extraordinary item (net of tax)arrow_forwardIn presenting foreign currency denominated transactions to the functional currency of the entity, which of the following statements is correct? a. When nonmonetary items are translated from foreign currency to functional currency in the financial statements, foreign currency gain of loss will be recognized. b. Monetary items shall be initially recognized and measured at the exchange rate prevailing at the end of the reporting period. c. Foreign currency gain or loss arising from translation of the foreign currency denominated items to functional currency shall be presented in other comprehensive income with reclassification adjustment to profit or loss if realized. d. Foreign currency denominated income statement accounts shall be translated using the exchange rate at the date of transaction.arrow_forwardIn relation to IAS 21 The Effects of Changes in Foreign Exchange Rates, which of the following statements are true? (i) Exchange gains and losses arising on the retranslation of monetary items are recognised in other comprehensive income in the period. (ii) Non-monetary items measured at historical cost in a foreign currency are not retranslated at the reporting date. (iii) An intangible asset is a non-monetary item. A All of the above B (ii) and (iii) only C (i) and (iii) only D (i) and (ii) onlyarrow_forward
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