INTERNATIONAL ACCOUNTING
5th Edition
ISBN: 9781307458879
Author: Doupnik
Publisher: MCG/CREATE
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Chapter 7, Problem 18EP
a.
To determine
Prepare
b.
To determine
Prepare trial balance and compute the re -measurement gain or loss to be reported by Company C in Year 1, in case the functional currency of subsidiary is same as the parent’s reporting currency.
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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…
A 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?
The Isle of Palms Company (IOP), a U.S.-based entity, has a wholly owned subsidiary in Israel that has been determined as having the Israeli shekel (ILS) as its functional currency. On October 1, 2019, the Israeli subsidiary borrowed 500,000 Swiss francs (CHF) from a bank in Geneva for two years at an interest rate of 5 percent per year. The note payable and accrued interest are payable at the date of maturity. On December 31, 2020, the Israeli subsidiary has the following foreign currency balances on its books:
Interest expense
CHF
25,000
Interest payable
CHF
31,250
Note payable
CHF
500,000
Relevant exchange rates between the Israeli shekel (ILS) and Swiss franc (CHF), and between the U.S. dollar (USD) and Israeli shekel (ILS) follow:
ILS per CHF
USD per ILS
October 1, 2019
3.86
0.30
January 1, 2020
3.91
0.29
Average for 2020
3.95
0.27
December 31, 2020
4.02
0.25
Determine the Israeli shekel amounts at which the Swiss franc balances…
Chapter 7 Solutions
INTERNATIONAL ACCOUNTING
Ch. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - Prob. 4QCh. 7 - Prob. 5QCh. 7 - 6. What are the major differences between IFRS and...Ch. 7 - Prob. 7QCh. 7 - 8. Which translation method does U.S. GAAP require...Ch. 7 - Prob. 9QCh. 7 - 10. How are gains and losses on foreign currency...
Ch. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Prob. 1EPCh. 7 - Prob. 2EPCh. 7 - Prob. 3EPCh. 7 - Prob. 4EPCh. 7 - 4. Which of the following best explains how a...Ch. 7 - In the translated financial statements, which...Ch. 7 - Prob. 7EPCh. 7 - Prob. 8EPCh. 7 - Prob. 9EPCh. 7 - Prob. 10EPCh. 7 - The Year 1 financial statements of the Chinese...Ch. 7 -
10. Simga Company's Turkish subsidiary repented...Ch. 7 - Prob. 13EPCh. 7 - Prob. 14EPCh. 7 - Prob. 15EPCh. 7 - Prob. 16EPCh. 7 - Prob. 17EPCh. 7 - Prob. 18EPCh. 7 - 16. Access the most recent annual report for a...Ch. 7 - Prob. 21EPCh. 7 - Prob. 22EPCh. 7 - Prob. 1CCh. 7 - Prob. 2C
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