Which translation method results in a set of financial statements as if the foreign subsidiary’s transactions were carried out in US dollars? Current rate method Temporal method
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- Which translation method results in a set of financial statements as if the foreign subsidiary’s transactions were carried out in US dollars?
- Current rate method
- Temporal method
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- 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 AccountsHow to translate a foreign subsidiary’s financial statements into its parent’s reporting currency using the current rate method and calculate the related translation adjustment?In accordance with U.S. generally accepted accounting principles, which translation combination is appropriate for a foreign operation whose functional currency is the U.S. dollar? Choose the correct option. Method Treatmemt of transition adjustment a. Current rate other comprehensive income b. Current rate Gain or loss in net income c. Temporal other comprehensive income d. Temporal Gain or loss in net income
- In accordance with U.S. generally accepted accounting principles, which translation combination is appropriate for a foreign operation whose functional currency is the U.S. dollar?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?Exchange difference arising from the translation of financial statements of a foreign operation into the presentation currency of the reporting entity shall be accounted for as Group of answer choices Translation gain or loss as a component of profit or loss Transaction gain or loss as component of other comprehensive income Translation gain or loss as a component of other comprehensive income Transaction gain or loss as component of profit or loss
- In the translated financial statements, which method of translation maintains the underlying valuation methods used in preparing the foreign currency financial statements?a. Current rate method; income statement translated at average exchange rate for the year.b. Current rate method; income statement translated at exchange rate at the balance sheet date.c. Temporal method.d. Monetary/nonmonetary method.Explain how a German subsidiary’s year-end balance in retained earnings is expressed in dollars assuming that the euro is the functional currency.Assume that a U.S. company has a French subsidiary whose functional currency is the euro. Explain why the translation adjustment is not included as a component of net income on the consolidated income statement.
- 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…At what rates should the following balance sheet accounts in foreign statements be translated (using the current rate method) into U.S. dollars?At what rates should the following balance sheet accounts in foreign statements be translated (using the current rate method) into U.S. dollars? Equipment Accumulated Depreciation—Equipment Current Current Current Average for year Historical Current Historical Historical