ADVANCED FINANCIAL ACCOUNTING-ACCESS
ADVANCED FINANCIAL ACCOUNTING-ACCESS
12th Edition
ISBN: 9781260518740
Author: Christensen
Publisher: MCG
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Chapter 12, Problem 12.4.6E
To determine

Introduction: Translation is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.

Re-measurement: It is process to measure the financial results of any other currency into functional currency.

To choose: The correct option.

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In order to demonstrate the use of the remeasurement process, assume that at the beginning of the year a U.S. parent company invested 100,000 foreign currency B (FCB) to form a 100% owned subsidiary.The subsidiary immediately invested the foreign currency in land at a cost of 50,000 FCB and inventory with a cost of 50,000 FCB. At midyear, 50% of the inventory was sold for 40,000 FCB. At year-end, assume that the sale is still uncollected. Although FCB is the subsidiary’s functional currency, the subsidiary maintains its books of record in foreign currency A (FCA). Assume the following exchange rates:                              Beginning of Year          Mid Year        End of Year1 FCB equals . . . . . .     12.5 FCA                           8 FCA             10 FCA1 FCA equals. . . . . .      0.08 FCB                         0.125 FCB        0.10 FCB1 FCA equals. . . . . .      $0.20                                $0.40                $0.301 FCB equals . . . . . .      $2.50…
On 12/20/20x1, Sour Company, a U.S.-based entity, acquired all of the outstanding common stock of corn Industries, which is located in Switzerland.   The cost of acquiring corn was 8.2 million Swiss francs.  On the acquisition date, the U.S. dollar/Swiss franc exchange rate was $0.52 = SF1.   The assets and liabilities acquired at 12/20/20x1 were: Assets Swiss Franc Liabilities and Equity Swiss Franc Cash 500,000 Notes Payable 1,270,500 Inventory 770,500 Shareholders' Equity 3,500,000 Property, plant and equipment 3,500,000     Total Assets $4,770,500 Total Liabilities and Shareholders’ Equity $4,770,500   At 12/31/20x1, Sour Company prepares its year-end financial statements. By 12/31/20x1, the U.S. dollar/Swiss franc exchange rate was $0.535 = SF1.   For purposes of this problem, assume that after the 12/20/20x1, corn Industries had no additional transactions that changed their financial position.   Required Determine the…
On January 1, 20X1, Prime Company purchased all the outstanding stock of Spring Company, located in Canada, for $137,700. On January 1, 20X1, the direct exchange rate for the Canadian dollar (C$) was C$1 = $0.81. Spring's book value on January 1, 20X1, was C$96,000. On January 1, 20X1, the book value of the Spring's identifiable assets and liabilities approximated their fair values except for property, plant, and equipment. The remaining useful life of Spring's property, plant and equipment at January 1, 20X1, was 10 years. During 20X1, Spring earned C$24,000 in income and declared and paid C$7,400 in dividends. The dividends were declared and paid in Canadian dollars when the exchange rate was C$1 = $0.75. On December 31, 20X1, Prime continues to hold the Canadian currency received from the dividend. On December 31, 20X1, the direct exchange rate is C$1 = $0.64. The average exchange rate during 20X1 was C$1 = $0.76. Management has determined that the Canadian dollar is Spring's…

Chapter 12 Solutions

ADVANCED FINANCIAL ACCOUNTING-ACCESS

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