1.
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
Re-measurement: It is process to measure the financial results of any other currency into functional currency.
Translation: It is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.
- The currency at which foreign entity will record transaction in its books.
- The functional currency of foreign entity.
- The process to restatement into U. S dollars.
2.
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
Re-measurement: It is process to measure the financial results of any other currency into functional currency.
Translation: It is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.
- The currency at which foreign entity will record transaction in its books.
- The functional currency of foreign entity.
- The process to restatement into U. S dollars.
3.
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
Re-measurement: It is process to measure the financial results of any other currency into functional currency.
Translation: It is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.
a. The currency at which foreign entity will record transaction in its books.
b. The functional currency of foreign entity.
c. The process to restatement into U. S dollars.
4.
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
Re-measurement: It is process to measure the financial results of any other currency into functional currency.
Translation: It is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.
d. The currency at which foreign entity will record transaction in its books.
e. The functional currency of foreign entity.
f. The process to restatement into U. S dollars.
![Check Mark](/static/check-mark.png)
Want to see the full answer?
Check out a sample textbook solution![Blurred answer](/static/blurred-answer.jpg)
Chapter 12 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- A U.S. parent owns a subsidiary in France, the subsidiary's accounts are maintained in euros, and its functional currency is the U.S. dollar. During the year, the euro has weakened against the U.S. dollar (U.S.$/€ rate has declined).Which one of the subsidiary's transactions below increases the amount of remeasurement losses reported when the subsidiary's accounts are translated to U.S. dollars?Select one:A. Inventory purchasesB. Depreciation expenseC. Sale of equity securitiesD. Sales revenue Plz answer fast without plagiarism.arrow_forwardClarke Company operates a subsidiary in another nation. What does the phrase functional currency signify in reference to this subsidiary? How is the nominal value of the functional currency determined?arrow_forwardThe functional currency of Bertrand, Inc.’s Irish subsidiary is the euro. Bertrand borrowed euros as a partial hedge of its investment in the subsidiary. Since then, the euro has decreased in value. Bertrand’s negative translation adjustment on its investment in the subsidiary exceeded its foreign exchange gain on its euro borrowing. How should Bertrand report the effects of the negative translation adjustment and foreign exchange gain in its consolidated financial statements?a. Report the translation adjustment in accumulated other comprehensive income on the balance sheet and the foreign exchange gain as a gain on the income statement.b. Report the translation adjustment in the income statement and defer the foreign exchange gain in accumulated other comprehensive income on the balance sheet.c. Report the translation adjustment less the foreign exchange gain in accumulated other comprehensive income on the balance sheet.d. Report the translation adjustment less the foreign exchange…arrow_forward
- 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. $450,000arrow_forwardThe functional currency of Bertrand, Inc.’s Irish subsidiary is the euro. Bertrand borrowed euros as a partial hedge of its investment in the subsidiary. Since then, the euro has decreased in value. Bertrand’s negative translation adjustment on its investment in the subsidiary exceeded its foreign exchange gain on its euro borrowing. How should Bertrand report the effects of the negative translation adjustment and foreign exchange gain in its consolidated financial statements? Choose the correct.a. Report the translation adjustment in accumulated other comprehensive income on the balance sheet and the foreign exchange gain as a gain on the income statement.b. Report the translation adjustment in the income statement and defer the foreign exchange gain in accumulated other comprehensive income on the balance sheet.c. Report the translation adjustment less the foreign exchange gain in accumulated other comprehensive income on the balance sheet.d. Report the translation adjustment less…arrow_forwardAccounts 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…arrow_forward
- Clarke Company has a subsidiary operating in a foreign country. In relation to this subsidiary, what does the term functional currency mean? How is the functional currency determined?arrow_forwardNewberry, Inc., whose reporting currency is the U.S. dollar ($), has a subsidiary in Argentina, whose functional currency also is the $. The subsidiary acquires inventory on credit on November 1, 2017, for 100,000 pesos that is sold on January 17, 2018, for 130,000 pesos. The subsidiary pays for the inventory on January 31, 2018. Currency exchange rates are as follows:Cost of goods sold . . .. LCU 5,000,000Beginning inventory . . . . . . . 500,000Ending inventory . . . . . . . . . . 600,000November 1, 2017 . . . . $0.16 = 1 pesoDecember 31, 2017 . ...... . . 0.17 = 1January 17, 2018 . . . . . . . . . 0.18 = 1January 31, 2018 . . . . . . . . 0.19 = 1 What amount does Newberry’s consolidated balance sheet report for this inventory at December 31, 2017? Choose the correct.a. $16,000.b. $17,000.c. $18,000.d. $19,000.arrow_forwardAssume that a U.S. company has a foreign subsidiary whose functional currency is the U.S. dollar. Explain how exchange rates between the foreign currency and the dollar would have to change in order to result in a current-year remeasurement loss and how the company could use a foreign currency loan receivable or payable to hedge against its net investment in the foreign subsidiary.arrow_forward
- 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.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_forwardA subsidiary’s functional currency is the U.S. dollar. The exchange rate used to convert depreciation expense for a building on the subsidiary’s financial statements from its local currency unit to the U.S. dollar is the: Select one: a. Current rate b. Historical rate c. Average historical rate d. Weighted average ratearrow_forward
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781285190907/9781285190907_smallCoverImage.gif)