1. In accounting, the term translation refers to
2. What is a company’s functional currency?
3. According to U.S. GAAP for a local currency perspective, which method is
usually required for translating a foreign subsidiary’s financial statements into the
parent’s reporting currency?
4. In translating a foreign subsidiary‘s financial statements, which exchange rate
does the current method require for the subsidiary’s assets and liabilities?
5. The translation adjustment from translating a foreign subsidiary’s financial
statements should be shown as
6. Westmore, Ltd. is a British subsidiary of a U.S. company. Westmore’s
functional currency is the pound sterling (≤). The following exchange rates were in
effect during 2011:
Westmore reported sales of ≤1,500,000 during 2011. What amount (rounded) would
have been included for this subsidiary in calculating consolidated sales?
7. Westmore, Ltd. is a British subsidiary of a U.S. company. Westmore’s
functional currency is the pound sterling (≤). The following exchange rates were in
effect during 2011:
On December 31, 2011, Westmore had accounts receivable of ≤280,000. What
amount (rounded) would have been included for this subsidiary in calculating
consolidated accounts receivable?
8. Gunther Co. established a subsidiary in Mexico on January 1, 2011. The
subsidiary engaged in the following transactions during 2011:
What amount of foreign exchange gain or loss would have been recognized in
Gunther’s consolidated income statement for 2011?
9. Darron Co. was formed on January 1, 2011 as a wholly owned foreign
subsidiary of a U.S. corporation. Darron‘s functional currency was the stickle (§). The
following transactions and events occurred during 2011:
What exchange rate should have been used in translating Darron‘s revenues and
expenses for 2011?
10. Darron Co. was formed on January 1, 2011 as a wholly owned foreign
subsidiary of a U.S. corporation. Darron‘s functional currency was the stickle (§). The
following transactions and events occurred during 2011:
What was the amount of the translation adjustment for 2011?
11. Sinkal Co. was formed on January 1, 2011 as a wholly owned foreign
subsidiary of a U.S. corporation. Sinkal‘s functional currency was the stickle (§). The
following transactions and events occurred during 2011:
What was the amount of the translation adjustment for 2011?
12. Which accounts are translated using current exchange rates?
13. Which accounts are remeasured using current exchange rates?
14. For a foreign subsidiary that uses the U.S. dollar as its functional currency,
what method is required to ready the financial statements for consolidation?
15. Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary’s
functional currency was the U.S. dollar.
Which one of the following statements would justify this conclusion?
16. Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary‘s
functional currency was the U.S. dollar.
What must Dilty do to ready the subsidiary’s financial statements for consolidation?
17. Certain balance sheet accounts of a foreign subsidiary of the Tulip Co. had
been stated in U.S. dollars as follows:
If the subsidiary’s local currency is its functional currency, what total amount should
be included in Tulip’s balance sheet in U.S. dollars?
18. Certain balance sheet accounts of a foreign subsidiary of the Tulip Co. had
been stated in U.S. dollars as follows:
If the U.S. dollar is the functional currency of this subsidiary, what total amount
should be included in Tulip’s balance sheet in U.S. dollars?
19. A subsidiary of Porter Inc., a U.S. company, was located in a foreign country.
The functional currency of this subsidiary was the Stickle (§), the local currency
where the subsidiary is located. The subsidiary acquired inventory on credit on
November 1, 2010, for §120,000 that was sold on January 17, 2011 for §156,000. The
subsidiary paid for the inventory on January 31, 2011. Currency exchange rates
between the dollar and the Stickle were as follows:
What amount would have been reported for this inventory in Porter’s consolidated
balance sheet at December 31, 2010?
20. A subsidiary of Porter Inc., a U.S. company, was located in a foreign country.
The functional currency of this subsidiary was the Stickle (§), the local currency
where the subsidiary is located. The subsidiary acquired inventory on credit on
November 1, 2010, for §120,000 that was sold on January 17, 2011 for §156,000. The
subsidiary paid for the inventory on January 31, 2011. Currency exchange rates
between the dollar and the Stickle were as follows:
What amount would have been reported for cost of goods sold on Porter’s
consolidated income statement at December 31, 2011?
21. A U.S. company’s foreign subsidiary had the following amounts in stickles (§)
in 2011:
The average exchange rate during 2011 was §1 = $.96. The beginning inventory was
acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired
when the exchange rate was §1 = $.90. The exchange rate at December 31, 2011 was
§1 = $.84. Assuming that the foreign country had a highly inflationary economy, at
what amount should the foreign subsidiary’s cost of goods sold have been reflected in
the 2011 U.S. dollar income statement?
22. A U.S. company’s foreign subsidiary had the following amounts in stickles (§),
the functional currency, in 2011:
The average exchange rate during 2011 was §1 = $.96. The beginning inventory was
acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired
when the exchange rate was §1 = $.90. The exchange rate at December 31, 2011 was
§1 = $.84. At what amount should the foreign subsidiary’s cost of goods sold have
been reflected in the 2011 U.S. dollar income statement?