ADV.FIN.ACCT.LL W/CONNECT+PROCTORIO PLUS
12th Edition
ISBN: 9781266380570
Author: Christensen
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
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.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
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
ADV.FIN.ACCT.LL W/CONNECT+PROCTORIO PLUS
Ch. 12 - Prob. 12.1QCh. 12 - Prob. 12.2QCh. 12 - Prob. 12.3QCh. 12 - How widely used are IFRS? Can IFRS be used for...Ch. 12 - Prob. 12.5QCh. 12 - Prob. 12.6QCh. 12 - Prob. 12.7QCh. 12 - Prob. 12.8QCh. 12 - Prob. 12.9QCh. 12 - Prob. 12.10Q
Ch. 12 - Prob. 12.11QCh. 12 - Prob. 12.12QCh. 12 - Prob. 12.13QCh. 12 - Prob. 12.14QCh. 12 - Prob. 12.15QCh. 12 - Prob. 12.16QCh. 12 - Prob. 12.17QCh. 12 - Prob. 12.18QCh. 12 - Prob. 12.19QCh. 12 - Prob. 12.20QCh. 12 - Prob. 12.4CCh. 12 - Prob. 12.5CCh. 12 - Prob. 12.6CCh. 12 - Prob. 12.7CCh. 12 - Prob. 12.1.1ECh. 12 - Prob. 12.1.2ECh. 12 - Prob. 12.1.3ECh. 12 - Prob. 12.1.4ECh. 12 - Prob. 12.1.5ECh. 12 - Prob. 12.1.6ECh. 12 - Prob. 12.1.7ECh. 12 - Prob. 12.2.1ECh. 12 - Prob. 12.2.2ECh. 12 - Prob. 12.2.3ECh. 12 - Prob. 12.2.4ECh. 12 - Prob. 12.2.5ECh. 12 - Prob. 12.2.6ECh. 12 - Prob. 12.3ECh. 12 - Prob. 12.4.1ECh. 12 - Prob. 12.4.2ECh. 12 - Prob. 12.4.3ECh. 12 - Prob. 12.4.4ECh. 12 - Prob. 12.4.5ECh. 12 - Prob. 12.4.6ECh. 12 - Prob. 12.4.7ECh. 12 - Prob. 12.5ECh. 12 - Prob. 12.6ECh. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - Prob. 12.10ECh. 12 - Prob. 12.11ECh. 12 - Prob. 12.12ECh. 12 - Prob. 12.13ECh. 12 - Prob. 12.14ECh. 12 - Prob. 12.15ECh. 12 - Prob. 12.16PCh. 12 - Prob. 12.17PCh. 12 - Prob. 12.18PCh. 12 - Prob. 12.19PCh. 12 - Remeasurement Gain or Loss Refer to the...Ch. 12 - Prob. 12.21PCh. 12 - Remeasurement and Proof of Remeasurement Gain or...Ch. 12 - Translation Palermo Inc. purchased 80 percent of...Ch. 12 - Prob. 12.24PCh. 12 - Prob. 12.25PCh. 12 - Prob. 12.26PCh. 12 - Prob. 12.27PCh. 12 - Prob. 12.28PCh. 12 - Prob. 12.29PCh. 12 - Prob. 12.30PCh. 12 - Prob. 12.31PCh. 12 - Prob. 12.32PCh. 12 - Prob. 12.33P
Knowledge Booster
Similar questions
- Columbia Corporation, a U.S.-based company, acquired a 100% interest in Swoboda Company in Lodz, Poland on January 1, Year 1 when the exchange rate for the Polish zloty was $0.25. Translate Swoboda’s financial statements into U.S dollars in accordance with U.S. GAAP at December 31, Year 2, using the three scenarios presented in the case and explain why the translation adjustments end up as positive or negative numbers. Read the case on page 325 of the textbook and submit an Excel file with your response to questions 1 and 2. For question 1, prepare the financial statements under each of the three scenarios as instructed.arrow_forwardColumbia Corporation, a U.S.-based company, acquired a 100% interest in Swoboda Company in Lodz, Poland on January 1, Year 1 when the exchange rate for the Polish zloty was $0.25. Translate Swoboda’s financial statements into U.S dollars in accordance with U.S. GAAP at December 31, Year 2, using the three scenarios presented in the case and explain why the translation adjustments end up as positive or negative numbers.arrow_forwardDengararrow_forward
- A U.S. parent acquired all of the stock of an Italian subsidiary on January 1, 2023, for € 1,050,000. The excess paid over book value was attributed to goodwill, which was impaired by € 35,000 during 2023. The subsidiary's January 1 and December 31, 2023, trial balances are as follows, in euros: Cash, receivables Inventories, at FIFO cost Plant & equipment, net Liabilities Capital stock Retained earnings, beginning Dividends Sales revenue Cost of goods sold Depreciation expense Out-of-pocket expenses December 31, 2023 Dr (Cr) January 1, 2023 Dr (Cr) € 126.000 € 140,000 350,000 280,000 910,000 1,120,000 (756,000) (980,000) (140,000) (140,000) (420,000) (420,000) 70,000 January 1, 2023 Average for 2023 Rate when dividends declared Rate when ending inventory purchased December 31, 2023 Select one: O a. $235,200 O b. $210,000 O c. $245,700 d. $256,200 (2,800,000) 1,610,000 Sales, purchases, and recurring out-of-pocket expenses occurred evenly throughout the year. The subsidiary's beginning…arrow_forwardAssume that Palm Company owns 100% of Wu Company which is located in China. Wu's functional currency is the U.S. dollar. On 1/1/X1, Wu Company acquired equipment for 100,000 yen when the exchange rate was $1.2 per yen. During year X1, Wu has recorded S-L depreciation of 10,000 yen based on a 10-year life. The 12/31/X1 exchange rate is $1.4 and the average exchange rate for the year was $1.3. Based on this information, Wu's depreciation expense should be reported at which of the following amounts on 12/31/X1?arrow_forwardA subsidiary of Reynolds Inc., a U.S. company, was located in a foreign country. The local currency of this subsidiary was the Euro (€) while the functional currency of this subsidiary was the U.S. dollar. The subsidiary acquired Equipment A on January 1, 2018, for €250,000. Depreciation expense associated with Equipment A was €25,000 per year. On January 1, 2020, the subsidiary acquired Equipment B for €150,000 and Equipment B had associated depreciation expense of €10,000. The subsidiary owned no other depreciable assets. Currency exchange rates between the U.S. dollar and the Euro were as follows: January 1, 2018 December 31, 2018. 2018 Average January 1, 2019 December 31, 2019 2019 Average January 1, 2020 December 31, 2020 2020 Average Multiple Choice O What amount would have been reported for depreciation expense related to the equipment owned by the subsidiary in Reynolds's consolidated balance sheet at December 31, 2018? O O O $29,500. $28,500. $30,000. $12,000. €1= $1.20 €1=…arrow_forward
- please answer do not image formatarrow_forwardA U.S. company owns an 80% interest in a company located on Mars. Martian currency is called the Martian Credit. During the year the parent company sold inventory that had cost $24,400 to the subsidiary on account for $30,000 when the exchange rate was $0.5192. The subsidiary still held one-half of the inventory and had not paid the parent company for the purchase at the end of the fiscal period. The unsettled account is denominated in dollars. The exchange rate at the fiscal year-end was $0.4994. (a1) Compute the amounts that would be reported for the inventory and accounts payable in the subsidiary's translated balance sheet. The entity's functional currency is the Martian Credit. (Round answers to O decimal places, e.g. 5.125.) Inventory Accounts Payable $ $arrow_forwardA U.S. company owns an 80% interest in a company located on Mars. Martian currency is called the Martian Credit. During the year the parent company sold inventory that had cost $24,000 to the subsidiary on account for $30,800 when the exchange rate was $0.5192. The subsidiary still held one-half of the inventory and had not paid the parent company for the purchase at the end of the fiscal period. The unsettled account is denominated in dollars. The exchange rate at the fiscal year-end was $0.4994. Assuming that the transaction had been denominated in 47,004 Martian Credits rather than dollars, compute the transaction gain or loss that would be reported by the parent company.arrow_forward
- On December 18, 2020, Stephanie Corporation acquired 100 percent of a Swiss company for 4.004 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2020, the book and fair values of the subsidiary’s assets and liabilities were as follows: Cash CHF 804,000 Inventory 1,304,000 Property, plant, and equipment 4,004,000 Notes payable (2,108,000 ) Stephanie prepares consolidated financial statements on December 31, 2020. By that date, the Swiss franc has appreciated to $1.10 = CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation. Determine the translation adjustment to be reported on Stephanie’s December 31, 2020, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary’s functional currency. What is the economic relevance of this translation adjustment? Determine the remeasurement gain or loss…arrow_forwardOn December 18, 2020, Stephanie Corporation acquired 100 percent of a Swiss company for 4.006 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2020, the book and fair values of the subsidiary's assets and liabilities were as follows: Cash CHF Inventory Property, plant, and equipment Notes payable 806,000 1,306,000 4,006,000 (2,112,000) Stephanie prepares consolidated financial statements on December 31, 2020. By that date, the Swiss franc has appreciated to $1.10 = CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation. a. Determine the translation adjustment to be reported on Stephanie's December 31, 2020, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary's functional currency. What is the economic relevance of this translation adjustment? b. Determine the remeasurement gain or loss to be reported in Stephanie's 2020…arrow_forwardOn December 18, 2020, Stephanie Corporation acquired 100 percent of a Swiss company for 4.022 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2020, the book and fair values of the subsidiary’s assets and liabilities were as follows: Cash CHF 822,000 Inventory 1,322,000 Property, plant, and equipment 4,022,000 Notes payable (2,144,000 ) Stephanie prepares consolidated financial statements on December 31, 2020. By that date, the Swiss franc has appreciated to $1.10 = CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation. Determine the translation adjustment to be reported on Stephanie’s December 31, 2020, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary’s functional currency. What is the economic relevance of this translation adjustment? Determine the remeasurement gain or loss…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning