a
Introduction: Translation adjustment is the method used to convert local currency into the parents' functional currency when the local currency of foreign business is its functional currency. The current rate is used to translate the financial statements that are the exchange rate on the
The subsidiary’s income statement ending in net income for the year.
b
Introduction: Translation adjustment is the method used to convert local currency into the parents' functional currency when the local currency of foreign business is its functional currency. The current rate is used to translate the financial statements that are the exchange rate on the balance sheet date. The average rate is used to translate revenue and expenses as it is assumed that it occurs uniformly over the period. Any gain or loss on account of translation adjustment is recognized in the comprehensive income statement.
The statement of comprehensive income for subsidiary.
c
Introduction: Translation adjustment is the method used to convert local currency into the parents' functional currency when the local currency of foreign business is its functional currency. The current rate is used to translate the financial statements that are the exchange rate on the balance sheet date. The average rate is used to translate revenue and expenses as it is assumed that it occurs uniformly over the period. Any gain or loss on account of translation adjustment is recognized in the comprehensive income statement.
The balance sheet for the year end related to subsidiary.
d
Introduction: Translation adjustment is the method used to convert local currency into the parents' functional currency when the local currency of foreign business is its functional currency. The current rate is used to translate the financial statements that are the exchange rate on the balance sheet date. The average rate is used to translate revenue and expenses as it is assumed that it occurs uniformly over the period. Any gain or loss on account of translation adjustment is recognized in the comprehensive income statement.
The major differences between the one statement format of the income statement and comprehensive income versus the two statement format of the income statement with a separate statement of comprehensive income.
![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
- View Policies Current Attempt in Progress AU.S. company owns an 80% interest in a company located on Mars. Martian currency is called the Martian Credit. During the year the parent company sold inventory that had cost $23,700 to the subsidiary on account for $29,400 when the exchange rate was $0.5192. The subsidiary still held one-half of the inventory and had not paid the parent company for the purchase at the end of the fiscal period. The unsettled account is denominated in dollars. The exchange rate at the fiscal year-end was $0.4994. (c1) Assuming that the transaction had been denominated in 46,148 Martian Credits rather than dollars, compute the transaction gain or loss that would be reported by the parent company. (Round answers to O decimal places, e.g. 5,125.) Transaction $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_forwardQuestion 10 Dover Company owns 90% of the capital stock of a foreign subsidiary located in Italy. Dover's accountant has just translated the accounts of the foreign subsidiary and determined that a debit translation adjustment of $80,000 exists. If Dover uses the fully adjusted equity method for its investment, what entry should Dover record in order to recognize the translation adjustment? Debit-Investment in Italian Subsidiary 72,000 Credit-Other Comprehensive Income—Translation Adjustment 72,000 Debit-Other Comprehensive Income—Translation Adjustment 80,000 Credit-Investment in Italian Subsidiary 80,000 Debit-Other Comprehensive Income—Translation Adjustment 72,000 Credit-Investment in Italian Subsidiary 72,000 No entry requiredarrow_forward
- Current Attempt in Progress A U.S. company owns an 80 % interest in a company located on Mars. Martian currency is called the Martian Credit. During the year the parent company sold inventory that had cost $23,900 to the subsidiary on account for $29,900 when the exchange rate was $0.5192. The subsidiary still held one-half of the inventory and had not paid the parent company for the purchase at the end of the fiscal period. The unsettled account is denominated in dollars. The exchange rate at the fiscal year-end was $0.4994. (a1) Compute the amounts that would be reported for the inventory and accounts payable in the subsidiary's translated balance sheet. The entity's functional currency is the Martian Credit. (Round answers to 0 decimal places, e.g. 5.125.) Inventory Accounts Payable $arrow_forwardStiff Sails Corporation, a U.S. company, operates a 100%-owned British subsidiary, SeaBeW Corporation. The U.S. dollar is the functional currency of the subsidiary. Financial statements for the subsidiary for the fiscal year-end December 31, 2024, are as follows: Sales Cost of Goods Sold Beginning Inventory Purchases Cost of Goods Sold Depreciation B. Goods Available For Sale Less: Ending Inventory Selling and Admin. Expenses Income Taxes Net Income Current Assets Cash Accts. Rec. Inventories Required: A. SeaBeWe Corporation Income Statement 155,000 171,000 285,000 611,000 SeaBeWe Corporation Partial Balance Sheet 310,000 265,000 575,000 285,000 290,000 79,000 155,000 32,000 July 1, 2022 Jan. 1, 2024 June 30, 2024 Dec. 31, 2024 Average for 2024 1. Cost of Goods Sold. 2. Depreciation Expense. 3. Equipment. Other Information: 1. Equipment costing 340,000 pounds was acquired July 1, 2022, and 38,000 was acquired June 30, 2024. Depreciation for the period was as follows: Pounds 650,000…arrow_forwardCurrent Attempt in Progress A U.S. company owns an 80% interest in a company located on Mars. Martian currency is called the Martian Credit. During the year the parent company sold inventory that had cost $24,000 to the subsidiary on account for $30,000 when the exchange rate was $0.5192. The subsidiary still held one-half of the inventory and had not paid the parent company for the purchase at the end of the fiscal period. The unsettled account is denominated in dollars. The exchange rate at the fiscal year-end was $0.4994. How is the transaction gain or loss reported in the consolidated financial statements? BIUT₂ T² Ix | E 三 N á OWord(s)arrow_forward
- On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 71,000. SunTime's December 31, 20X1, trial balance in SFr is as follows: Cash Accounts Receivable (net) Receivable from Popular Creek Inventory Plant and Equipment Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Sales Cost of Goods Sold Depreciation Expense Operating Expense Dividends Paid Total Additional Information January 1 March 1 Debit SFr 8,300 23,000 7,000 28,000 110,000 SFr 1 = $ 0.73 SFr 1 = $ 0.74 SFr 1 $ 0.77 SFr 1 = $ 0.80 SFr 1 = $ 0.75 70,500 11,100 31,000 18,000 SFr 306,900 Credit SFr 11,100 12,400 52,000 71,000 160,400 1. The receivable from Popular Creek is denominated in Swiss francs. Popular Creek's books show a $6,000 payable to SunTime. 2. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1. 3. Equipment is depreciated by…arrow_forwardCertain balance sheet accounts in a foreign subsidiary of Monument Company on December 31, 20X1, have been restated in U.S. dollars as follows: Accounts Receivable, Current Accounts Receivable, Long-Term Prepaid Insurance Patents Total O $160,000. O $168,000. O $172,000. O $188,000. Current Rates $80,000 40,000 10,000 30,000 Restated at $160,000 Historical Rates $96,000 44,000 12,000 Assume the U.S. dollar is the functional currency. What total should be included in Monument's balance sheet for December 31, 20X1, for these items? 36,000 $188,000arrow_forwardwwwww Brico Enterprises, a U.S. corporation, acquired an 80% interest in Bandar Distributors in June 2012 when 1 FC equaled $1.62. Bandar is a foreign corporation whose functional currency is the FC. The condensed pre-closing comparative trial balance for Bandar for the current year ended December 31, 2015, is as follows: Current Assets Long-Lived Assets (net) Other Assets. Cost of Sales Other Expenses. Current Liabilities Other Liabilities. Net Sales. Dividends Declared. Common Stock. Retained Earnings (beginning) Total.... Debit (Credit) December 31, 2015 December 31, 2014 165,000 FC 185,000 FC L 420,000 400,000 170,000 165,000 525,000 425,000 205,000 260,000 (175,000) (135,000) (125,000) (225,000) (820,000) 25,000 (100,000) (290,000) (865,000) 30,000 (100,000) (140,000) 0 0 Dividends are declared on March 1 of each year and are paid on March 31 of that year. The translated balance in retained earnings at the beginning of 2014 was $227,300. 1. Determine the balance in the cumulative…arrow_forward
- On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 60,000. SunTime's December 31, 20X1, trial balance in SFr is as follows: Cash Accounts Receivable (net) Receivable from Popular Creek Inventory Plant and Equipment Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Sales Cost of Goods Sold Depreciation Expense Operating Expense Dividends Paid Total Additional Information January 1 March 1 SFr 1 = $0.80 SFr 1 = $0.77 SFr 1 $ 0.74 SFr 1 = $ 0.73 SFr 1 = $ 0.75 Debit SFr 7,000 20,000 5,000 25,000 100,000 November 1 December 31 20X1 average 6. The U.S. dollar is the functional currency. 70,000 10,000 30,000 15,000 SFr 282,000 Credit 1. The receivable from Popular Creek is denominated in Swiss francs. Its books show a $4,000 payable to SunTime. 2. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1. 3.…arrow_forwardWahl Company’s 20X5 consolidated financial statements include two wholly owned subsidiaries, Wahl Company of Australia (Wahl A) and Wahl Company of France (Wahl F). Functional currencies are the U.S. dollar for Wahl A and the European euro for Wahl F. Required 1) What are the objectives of translating a foreign subsidiary’s financial statements? 2) How are gains and losses arising from the translation or remeasurement of each subsidiary’s financial statements measured and reported in Wahl’s consolidated financial statements? 3) What exchange rate is used to incorporate each subsidiary’s equipment cost, accumulated depreciation, and depreciation expense in Wahl’s consolidated financial statements?arrow_forwardYang Corporation starts a foreign subsidiary on January 1 by investing 20,000 rand. Yang owns all of the shares of the subsidiary’s common stock. The foreign subsidiary generates 40,000 rand of net income throughout the year and pays no dividends. The rand is the foreign subsidiary’s functional currency. Currency exchange rates for 1 rand are as follows:In preparing consolidated financial statements, what translation adjustment will Yang report at the end of the current year?a. $400 positive (credit).b. $1,000 positive (credit).c. $1,400 positive (credit).d. $2,400 positive (credit).arrow_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)