AICPA: BB Global
46. If a subsidiary is operating in a highly inflationary economy, how are the financial statements to be
restated?
A) Historical rate.
B) Working capital rate.
C) Translation.
D) Temporal method.
E) Current rate.
47. When consolidating a foreign subsidiary, which of the following statements is true?
A) Parent reports a cumulative translation adjustment from adjusting its investment account under the
equity method.
B) Parent reports a gain or loss in net income from adjusting its investment account under the equity
method.
C) Subsidiary’s cumulative translation adjustment is carried forward to the consolidated balance sheet.
D) Subsidiary’s income/loss is carried forward to the consolidated balance sheet.
E) All foreign currency gains/losses are eliminated in the consolidated income statement and balance
sheet.
48. When preparing a consolidated statement of cash flows, which of the following statements is false?
A) All operating activity items are translated at an average exchange rate for the period.
B) A change in accounts receivable is translated using the current rate.
C) A change in long-term debt is translated using the historical rate at the date of the change.
D) Dividends paid are translated using the historical rate at the date of the payment.
E) All items follow translation rates used for the balance sheet and the income statement.
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Difficulty: 3 Hard
Blooms: Analyze
AACSB: Diversity
AACSB: Analytical Thinking
AICPA: BB Global
AICPA: FN Measurement
[QUESTION]
49. When preparing a consolidation worksheet for a parent and its foreign subsidiary accounted for under
the equity method, which of the following statements is false?
A) The cumulative translation adjustment included in the Investment in Subsidiary account is eliminated.
B) The excess of fair value over book value since the date of acquisition is revalued for the change in
exchange rate.
C) The amount of equity income recognized by the parent in the current year is eliminated.
D) The allocations of excess of fair value over book value at the date of acquisition are eliminated.
E) The subsidiary’s stockholders’ equity accounts as of the beginning of the year are eliminated.
50. Compute the cost of goods sold for 2018 in U.S. dollars using the temporal method.
A) $376,650.
B) $387,750.
C) $388,800.
D) $400,950.
E) $409,050.
51. Compute the cost of goods sold for 2018 in U.S. dollars using the current rate method.
A) $376,550.
B) $387,750.
C) $388,800.
D) $400,950.
E) $409,050.
52. Compute ending inventory for 2018 under the temporal method.
A) $13,950.
B) $14,100.
C) $14,400.
D) $14,850.
E) $15,150.
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AICPA: FN Measurement
Feedback: €15,000 × $.99 = $14,850
[QUESTION]
REFER TO: 10-06
53. Compute ending inventory for 2018 under the current rate method.
A) $13,950.
B) $14,100.
C) $14,400.
D) $14,850.
E) $15,150.
54. Compute the December 31, 2018, inventory balance using the lower of cost or net realizable value
method under the temporal method.
A) $321,000.
B) $457,600.
C) $596,400.
D) $454,400.
E) $419,000.
55. Compute the December 31, 2018, inventory balance using the current rate method.
A) $454,400.
B) $457,600.
C) $596,400.
D) $419,000.
E) $321,000.
56. The financial statements for Perez are translated by its U.S. parent. What amount of gain or loss
would be reported in its translated income statement?
A) $1,530.
B) $1,575.
C) $1,590.
D) $1,090.
E) $1,650.
57. The financial statements for Perez are remeasured by its U.S. parent. What amount of gain or loss
would be reported in its translated income statement?
A) $1,530.
B) $1,575.
C) $1,590.
D) $1,090.
E) $1,650.
[QUESTION]
REFER TO: 10-09
58. Assuming the functional currency of the subsidiary is the U.S. dollar, what total should be included
in Parker’s consolidated balance sheet at December 31, 2018, for the above items?
A) $407,500.
B) $418,000.
C) $396,000.
D) $403,500.
E) $398,500.
59. Assuming the functional currency of the subsidiary is the local currency, what total should be
included in Parker’s consolidated balance sheet at December 31, 2018, for the above items?
A) $407,500.
B) $418,000.
C) $396,000.
D) $403,500.
E) $398,500.
Restated at
Current Rates
Historical Rates
Cash
$ 47,500
$ 45,000
Accounts receivable
95,000
90,000
Marketable securities, at fair value
76,000
72,000
Land
57,000
54,000
Equipment (net)
142,500
135,000
Total
$418,000
$396,000
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Page 10-28
Difficulty: 2 Medium
Blooms: Apply
AACSB: Diversity
AACSB: Knowledge Application
AICPA: BB Global
AICPA: FN Measurement
Feedback: If LC is the Functional Currency, Current Rates Used for All Items = $418,000
[QUESTION]
REFER TO: 10-09
60. If the current rate used to restate these amounts is $.95, what was the average historical rate used to
arrive at the total amount for historical rates?
A) $0.9000.
B) $1.0000.
C) $0.9500.
D) $0.9474.
E) $1.0556.
61. Calculate the U.S. dollar amount allocated to the patent at January 1, 2018.
A) $50,000.
B) $35,000.
C) $34,000.
D) $32,500.
E) $28,200.
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AICPA: FN Measurement
Feedback: $350,000 – FV of Assets (C$450,000 × $.70) $315,000 = $35,000 Patent Value
[QUESTION]
REFER TO: 10-10
62. Amortization of the patent, translated, for 2018 would be
A) $ 7,000.
B) $10,000.
C) $ 6,800.
D) $ 9,000.
E) $ 6,500.
63. Compute the amount of the patent reported in the consolidated balance sheet at December 31, 2018.
A) $28,200.
B) $25,700.
C) $35,000.
D) $27,200.
E) $26,000.
64. Kennedy’s share of Hastie’s net income for 2018 would be
A) $18,000.
B) $15,000.
C) $18,200.
D) $16,000.
E) $18,500.
2018.
A) $364,000.
B) $372,000.
C) $380,000.
D) $360,000.
E) $404,000.
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Education.
Page 10-31
Learning Objective: 10-03
Topic: Translation method―Choose the rate to use
Topic: Determine whether current rate or temporal method
Topic: Use current rate method for balances
Difficulty: 1 Easy
Blooms: Apply
AACSB: Diversity
AACSB: Knowledge Application
AICPA: BB Global
AICPA: FN Measurement
Feedback: €400,000 × $.95 = $380,000
[QUESTION]
REFER TO: 10-11
66. Assume the functional currency is the Euro; compute the U.S. balance sheet amount for inventory at
December 31, 2018.
A) $18,800.
B) $19,600.
C) $18,000.
D) $20,200
E) $19,000.
67. Assume the functional currency is the Euro; compute the U.S. balance sheet amount for equipment
for 2018.
A) $81,900.
B) $90,900.
C) $83,700.
D) $88,200.
E) $85,500.
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Topic: Use current rate method for balances
Difficulty: 2 Medium
Blooms: Apply
AACSB: Diversity
AACSB: Knowledge Application
AICPA: BB Global
AICPA: FN Measurement
Feedback: €90,000 × $1.01 = $90,900
[QUESTION]
REFER TO: 10-11
68. Assume the functional currency is the Euro; compute the U.S. Statement of Retained Earnings
amount reported for Dividends in 2018.
A) $19,000.
B) $20,200.
C) $18,600.
D) $19,400.
E) $19,600.
69. Assume the functional currency is the Euro; compute the U.S. balance sheet amount for accumulated
depreciation for 2018.
A) $40,950.
B) $41,850.
C) $45,450.
D) $42,750.
E) $44,100.
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Feedback: €45,000 × $1.01 = $45,450
[QUESTION]
REFER TO: 10-11
70. Assume the functional currency is the Euro; compute the U.S. income statement amount for
depreciation expense for 2018.
A) $8,190.
B) $8,370.
C) $8,820.
D) $9,090.
E) $8,550.
71. Assume the functional currency is the U.S. Dollar; compute the U.S. income statement amount for
sales for 2018.
A) $364,000.
B) $372,000.
C) $380,000.
D) $360,000.
E) $404,000.
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AICPA: FN Measurement
Feedback: €400,000 × $.95 = $380,000
[QUESTION]
REFER TO: 10-11
72. Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for
inventory, at cost, for 2018.
A) $18,800.
B) $19,600.
C) $18,000.
D) $20,200.
E) $19,000.
73. Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for
equipment for 2018.
A) $81,900.
B) $90,900.
C) $83,700.
D) $88,200.
E) $85,500.