Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows: Current Rates Historical Rates Accounts Receivable, current $200000 $220000 Accounts Receivable, long term 100000 110000 Land 50000 55000 Patents 80000 85000 Total $430000 $470000 This subsidiary’s functional currency is the U.S. dollar. What total should Orchid’s balance sheet include for the preceding items?a. $430,000.b. $435,000.c. $440,000.d. $450,000.

Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows: Current Rates Historical Rates Accounts Receivable, current $200000 $220000 Accounts Receivable, long term 100000 110000 Land 50000 55000 Patents 80000 85000 Total $430000 $470000 This subsidiary’s functional currency is the U.S. dollar. What total should Orchid’s balance sheet include for the preceding items?a. $430,000.b. $435,000.c. $440,000.d. $450,000.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 22QA

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Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows: Current Rates Historical Rates Accounts Receivable, current $200000 $220000 Accounts Receivable, long term 100000 110000 Land 50000 55000 Patents 80000 85000 Total $430000 $470000 This subsidiary’s functional currency is a foreign currency. What total should Orchid’s balance sheet include for the preceding items? Choose the correct.a. $430,000.b. $435,000.c. $440,000.d. $450,000
Problems 6 and 7 are based on the following information.Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows:This subsidiary’s functional currency is a foreign currency. What total should Orchid’s balance sheet include for the preceding items?a. $430,000.b. $435,000.c. $440,000.d. $450,000.
Problems 6 and 7 are based on the following information.Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows:This subsidiary’s functional currency is the U.S. dollar. What total should Orchid’s balance sheet include for the preceding items?a. $430,000.b. $435,000.c. $440,000.d. $450,000.
Baxter Industries, Inc., is a U.S. company that has a wholly owned subsidiary. The subsidiary maintains its book and records in a foreign currency (FC) and the majority of its local expenses such as payroll, utilities, rent, etc., are paid in FC. However, the U.S. dollar is considered to be its functional currency. Selected exchange rates are as follows: 1 FC= 1 FC= March 1, 2013 . . . . . . . . . . . . $1.50 March 1, 2013 . . . . . . . . . . . . $1.50 Third quarter 2014 . . . . . . . . . 1.62 Fourth quarter 2014 . . . . . . . . 1.65 June 30, 2015. . . . . . . . . . . . . 1.70 First quarter 2015 . . . . . . . . . $1.50 Second quarter 2015 . . . . . . 1.75 Third quarter 2015 . . . . . . . . 1.71 Fourth quarter 2015 . . . . . . . 1.66 December 31, 2015 . . . . . . . 1.65 1. Identify several specific factors that would suggest that the U.S. dollar is the functional currency in spite of the fact regarding local expenses. 2. For each of the following compute the remeasured…
Romulus Corp. is a US-based company that prepares its fi nancial statements in accordancewith US GAAP. Romulus Corp. has two European subsidiaries: Julius and Augustus. AnthonyMarks, CFA, is an analyst trying to forecast Romulus’s 20X2 results. Marks has prepared separate forecasts for both Julius and Augustus, as well as for Romulus’s other operations (priorto consolidating the results.) He is now considering the impact of currency translation on theresults of both the subsidiaries and the parent company’s consolidated fi nancials. His researchhas provided the following insights:• Th e results for Julius will be translated into US dollars using the current rate method.• Th e results for Augustus will be translated into US dollars using the temporal method.• Both Julius and Augustus use the FIFO method to account for inventory • Julius had year-end 20X1 inventory of €340 million. Marks believes Julius will report €2,300in sales and €1,400 in cost of sales in 20X2.Marks also forecasts…
Romulus Corp. is a US-based company that prepares its fi nancial statements in accordancewith US GAAP. Romulus Corp. has two European subsidiaries: Julius and Augustus. AnthonyMarks, CFA, is an analyst trying to forecast Romulus’s 20X2 results. Marks has prepared separate forecasts for both Julius and Augustus, as well as for Romulus’s other operations (priorto consolidating the results.) He is now considering the impact of currency translation on theresults of both the subsidiaries and the parent company’s consolidated fi nancials. His researchhas provided the following insights:• Th e results for Julius will be translated into US dollars using the current rate method.• Th e results for Augustus will be translated into US dollars using the temporal method.• Both Julius and Augustus use the FIFO method to account for inventory • Julius had year-end 20X1 inventory of €340 million. Marks believes Julius will report €2,300in sales and €1,400 in cost of sales in 20X2.Marks also forecasts…
Romulus Corp. is a US-based company that prepares its fi nancial statements in accordancewith US GAAP. Romulus Corp. has two European subsidiaries: Julius and Augustus. AnthonyMarks, CFA, is an analyst trying to forecast Romulus’s 20X2 results. Marks has prepared separate forecasts for both Julius and Augustus, as well as for Romulus’s other operations (priorto consolidating the results.) He is now considering the impact of currency translation on theresults of both the subsidiaries and the parent company’s consolidated fi nancials. His researchhas provided the following insights:• Th e results for Julius will be translated into US dollars using the current rate method.• Th e results for Augustus will be translated into US dollars using the temporal method.• Both Julius and Augustus use the FIFO method to account for inventory • Julius had year-end 20X1 inventory of €340 million. Marks believes Julius will report €2,300in sales and €1,400 in cost of sales in 20X2.Marks also forecasts…
Romulus Corp. is a US-based company that prepares its fi nancial statements in accordancewith US GAAP. Romulus Corp. has two European subsidiaries: Julius and Augustus. AnthonyMarks, CFA, is an analyst trying to forecast Romulus’s 20X2 results. Marks has prepared separate forecasts for both Julius and Augustus, as well as for Romulus’s other operations (priorto consolidating the results.) He is now considering the impact of currency translation on theresults of both the subsidiaries and the parent company’s consolidated fi nancials. His researchhas provided the following insights:• Th e results for Julius will be translated into US dollars using the current rate method.• Th e results for Augustus will be translated into US dollars using the temporal method.• Both Julius and Augustus use the FIFO method to account for inventory • Julius had year-end 20X1 inventory of €340 million. Marks believes Julius will report €2,300in sales and €1,400 in cost of sales in 20X2.Marks also forecasts…
Accounts are listed below for a foreign subsidiary that maintains its books in its local currency. The equity interest in the subsidiary was acquired in a purchase transaction. In the space provided, indicate the exchange rate that would be used to translate the accounts into dollars assuming that the functional currency was identified (a) as the U.S. dollar and (b) as the foreign entity’s local currency. Exchange Rate if theFunctional Currency Is: Account U.S. Dollar Local Currency Cash Accounts receivable Inventory carried at cost Inventory carried at market Prepaid rent Property, plant, and equipment Goodwill Accounts payable Bonds payable Unamortized premium on bonds payable Preferred stock carried at issuance price Common stock Sales…
Assuming that the functional currency of a foreign subsidiary is the local currency, which of the following accounts would be translated at the current rate on the Balance Sheet date (B/S Rate)? a.Additional Paid-In Capital b.Cost of Goods Sold c.Retained Earnings d.Allowance for Doubtful Accounts
Explain how a German subsidiary’s year-end balance in retained earnings is expressed in dollars assuming that the euro is the functional currency.
Lancer, Inc. (a U.S.-based company), establishes a subsidiary in a foreign country on January 1, 2016. The following account balances for the year ending December 31, 2017, are stated in kanquo (KQ), the local currency:The following U.S.$ per KQ exchange rates are applicable:Lancer is preparing account balances to produce consolidated financial statements.a. Assuming that the kanquo is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?b. Assuming that the U.S. dollar is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?

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	Current Rates	Historical Rates
Accounts Receivable, current	$200000	$220000
Accounts Receivable, long term	100000	110000
Land	50000	55000
Patents	80000	85000
Total	$430000	$470000