A foreign subsidiary's functional currency is its local currency which has not experienced significant inflation. The weighted average exchange rate for the current year would be the appropriate exchange rate for translating a. Wages expense but not Sales to customers O b. Sales to customers but not Wages expense O c. neither Wages expense nor Sales to customers O d. Wages expense and Sales to customers

A foreign subsidiary's functional currency is its local currency which has not experienced significant inflation. The weighted average exchange rate for the current year would be the appropriate exchange rate for translating a. Wages expense but not Sales to customers O b. Sales to customers but not Wages expense O c. neither Wages expense nor Sales to customers O d. Wages expense and Sales to customers

Century 21 Accounting Multicolumn Journal

11th Edition

ISBN:9781337679503

Author:Gilbertson

Publisher:Gilbertson

Chapter24: Recording International And Internet Sales

Section: Chapter Questions

Problem 1CP

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A foreign subsidiary’s functional currency is its local currency, which has not experienced significant inflation. The current exchange rate at the balance sheet date is the appropriate exchange rate for translating:
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Question What causes balance sheet (or translation) exposure to foreign exchange risk? How does balance sheet exposure compare with transaction exposure? In translating a foreign subsidiary's financial statements, what exchange rate should be used for the subsidiary's revenues and expenses? How can a parent corporation determine the functional currency for a foreign subsidiary that conducts business in more than one country? What concept underlies the temporal method of translation? What concept underlies the current rate method of translation? How does balance sheet exposure differ under these two methods? What are the major procedural differences in applying the current rate and temporal methods of translation?
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