a
Introduction: Re-measurement is redrafting the financial statements of the foreign entities from the local currency to its functional currency. Re-measurement is required only when the functional currency is different from the local currency that is used to maintain books of accounts.
The schedule of re-measurement for December 31, 20X3
b
Introduction: Re-measurement is redrafting the financial statements of the foreign entities from the local currency to its functional currency. Re-measurement is required only when the functional currency is different from the local currency that is used to maintain books of accounts.
The proof of re-measurement gain or loss when the net monetary liability position on January 1, 20X3, was A$80,000
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Advanced Financial Accounting
- 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 $ 235,000 $255,000 Accounts receivable, long term 142,000 149,000 land 71,000 74,000 Patents 101,000 106,000 $ 549,000 $ 584,000 1. This subsidiary’s functional currency is a foreign currency. What total should Orchid’s balance sheet include for the preceding items?$557,000.$554,000.$564,000.$549,000. 2. This subsidiary’s functional currency is the U.S. dollar. What total should Orchid’s balance sheet include for the preceding items?$554,000.$557,000.$564,000.$549,000arrow_forwardCertain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows: Stated at Current Rates Historical Rates Accounts receivable, current $ 276,000 $ 296,000 Accounts receivable, long term 128,000 135,000 Land 64,000 67,000 Patents 92,000 97,000 $ 560,000 $ 595,000 This subsidiary’s functional currency is the U.S. dollar. What total should Orchid’s balance sheet include for the preceding items? a. $560,000. b. $575,000. c. $565,000. d. $568,000.arrow_forwardXYZ Corp, has carried out transactions denominated in foreign currency during the financial year ended 31 October 2019 and has conducted foreign operations through a foreign entity. Its functional and presentation currency is the US dollar. XYZ purchased inventory from a foreign supplier for Euros 8 million on 31 July 2019, the trade payable was still outstanding and the inventory were still held by XYZ Corp. XYZ Corp sold its products to a foreign customer for Euros 4 million on 31 July 2019 and received payment for the products in euros on 31 October 2019. Additionally, XYZ Corp purchase investment property on 1 November 2018 for Euros 28 million. At 31 October 2019, the investment property had a fair value of Euros 24 million. The company uses the fair value model in accounting for its investment properties. XYZ would like advice on how to treat this transactions in the financial statement for the year ended 31 October 2019. Exchange rates Date Euro:$ Average Rate for Year to…arrow_forward
- 3. Maples Corporation is a Canadian subsidiary of a U.S. parent company. Shown below is the company’s local currency income statement for 20X1. All transactions the company entered into should be considered to have occurred evenly throughout the year, except for the loss on storm damage, which occurred on September 30, 20X1, and resulted in the destruction of certain fixed assets. The U.S. parent translates Maples’ financial statements into U.S. dollars using the current rate method. (in millions of Canadian dollars) Sales C$ 480.7 Cost of goods sold (211.1 ) Loss on storm damage (25.0 ) Selling, general, and administrative expenses (103.0 ) Net income C$ 141.6 Exchange rates between the Canadian dollar and the U.S. dollar (stated as the U.S. dollar value of one Canadian dollar) at various times were as follows: Historical exchange rate when inventorythat was sold in 20X1 was purchased 0.85 Historical exchange rate when…arrow_forwardA subsidiary of Dunder Inc., a U.S. company, was located in a foreign country. The functional currency of this subsidiary was the Stickle (§) which is the local currency where the subsidiary is located. The subsidiary acquired inventory on credit on November 1, 2020, for §160,000 that was sold on January 17, 2021 for §207,000. The subsidiary paid for the inventory on January 31, 2021. Currency exchange rates between the dollar and the Stickle were as follows: November 1, 2020 $ 0.21 = § 1 December 31, 2020 $ 0.22 = § 1 January 1, 2021 $ 0.24 = § 1 January 31, 2021 $ 0.25 = § 1 Average for 2021 $ 0.27 = § 1 What amount would have been reported for this inventory in Dunder’s consolidated balance sheet at December 31, 2020?arrow_forwardOn December 31, 2008 a foreign subsidiary in US submitted the following balances stated in foreign currency:In US$ Total Assets 140,000 Total Liabilities 28,000 Ordinary Share 70,000 Retained Earnings 42,000 Relevant exchange rates are: current rate – P8.75; historical rate – P8.10; weighted average rate – P8.50. Assuming that the retained earnings of the subsidiary in December 31, 2008 translated to the peso is P290,000. What amount of cumulative translation adjustment is to be reported in the consolidated balance sheet on December 31, 2008?arrow_forward
- Kingsfield establishes a subsidiary operation in a foreign country on January 1, 2020. The country’s currency is the rial (R). To start this business, Kingsfield invests 10,000 rials. Of this amount, it spends 3,000 rials immediately to acquire equipment. Later, on April 1, 2020, it also purchases land. All subsidiary operational activities occur at an even rate throughout the year. Kingsfield uses the U.S. dollar as its reporting currency. The U.S. dollar ($) exchange rates for the rial for 2020 follow: January 1 $ 1.71 April 1 1.59 June 1 1.66 Weighted average 1.64 December 31 1.62 As of December 31, 2020, the subsidiary reports the following trial balance: Debits Credits Cash R 8,000 Accounts receivable 9,000 Equipment 3,000 Accumulated depreciation R 600 Land 5,000 Accounts payable 3,000 Notes payable (due 2028) 5,000 Common stock 10,000 Dividends declared…arrow_forwardThe controller of Pane Co. was preparing the company's financial statements. Pane had a wholly owned subsidiary in a foreign country that used the euro as its currency. At December 31, the exchange rate was $1 U.S. for 1.25 euro. The weighted-average exchange rate for the year was $1 U.S. for 1.50 euro. At December 31, the subsidiary had assets of 1 million euro and revenue for the year of 2 million euro. What amounts would assets and revenue translate for consolidation? Assets Revenue A. $666,666 $1,333,333 B. $666,666 $1,600,000 C. $800,000 $1,333,333 D. $800,000 $1,600,000arrow_forward1. An entity acquired all the share capital of a foreign entity at a consideration of 9 million baht on June 30, 2020. The fair value of the net assets of the foreign entity at that date was 6 million baht. The functional currency of the entity is the peso. The financial year-end of the entity is December 31, 2020. The exchange rates at June 30, 2020, and December 31, 2020, were 1.5 baht = P1 and 2 baht = P1 respectively.What figures for goodwill should be included in the financial statements for the year ended December 31, 2020?a. 2,000,000b. 1,500,000c. 3,000,000d. 3,500,000 2. Morny Corporation sold equipment to its 80% owned subsidiary, Morrie Corporaiton on January 1, 2020. Morny sold the equipment for P110,000 when its book value was P85,000 and it had a 5-year remaining useful life with no expected salvage value. Separate balance sheets for Morny and Morrie included the following equipment and accumulated depreciation amounts on December 31, 2020:Morny MorrieEquipment P750,000…arrow_forward
- Assume that a U.S.-based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes for given problem. Trecek Corporation incurs research and development costs of $650,000 in 2017, 30 percent of which relate to development activities subsequent to IAS 36 criteria having been met that indicate an intangible asset has been created. The newly developed product is brought to market in January 2018 and is expected to generate sales revenue for 10 years.a. Determine the appropriate accounting for research and development costs for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.b. Prepare the entry(ies) that Trecek would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.arrow_forwardIn order to demonstrate the use of the remeasurement process, assume that at the beginning of the year a U.S. parent company invested 100,000 foreign currency B (FCB) to form a 100% owned subsidiary.The subsidiary immediately invested the foreign currency in land at a cost of 50,000 FCB and inventory with a cost of 50,000 FCB. At midyear, 50% of the inventory was sold for 40,000 FCB. At year-end, assume that the sale is still uncollected. Although FCB is the subsidiary’s functional currency, the subsidiary maintains its books of record in foreign currency A (FCA). Assume the following exchange rates: Beginning of Year Mid Year End of Year1 FCB equals . . . . . . 12.5 FCA 8 FCA 10 FCA1 FCA equals. . . . . . 0.08 FCB 0.125 FCB 0.10 FCB1 FCA equals. . . . . . $0.20 $0.40 $0.301 FCB equals . . . . . . $2.50…arrow_forwardSean Regan Company formed a subsidiary in a foreign country on January 1, Year 1, through a combination of debt and equity financing. The foreign subsidiary acquired land on January 1, Year 1, which it rents to a local farmer. The foreign subsidiary’s financial statements for its first year of operations, in foreign currency units (FC), are presented in Exhibit 9.3 . All revenues and expenses were realized in cash during the year. Thus, the balance in the Cash account at December 31 (FC 1,750) is equal to the beginning balance in cash (FC 1,000) plus net income for the year (FC 750). The foreign country experienced significant inflation in Year 1, especially in the second half of the year. The general price index (GPI) during Year 1 was :January 1, Year 1 100Average, Year 1 125December 31, Year 1 200 The rate of inflation in Year 1 is 100 percent [(200 − 100)/100], and the foreign country clearly meets the definition of a hyperinflationary economy. (in FC) January 1…arrow_forward
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning