Concept explainers
Concept introduction:
Foreign currency translation:
It is the process of conversion of foreign entity’s functional currency financial statements to the reporting entity’s financial statements. This is a key part of financial statements consolidation process. The translation can be done using the following steps:
- Determination of functional currency of foreign entity
- Remeasure financial statements of foreign entity into reporting currency of parent company
- Record gains or losses on the translation of currencies
Requirement 1:
Identify financial statement where company reports adjustment for foreign currency translation for subsidiaries and use of U.S. dollar as their functional currency.
Concept introduction:
Foreign currency translation:
It is the process of conversion of foreign entity’s functional currency financial statements to the reporting entity’s financial statements. This is a key part of financial statements consolidation process. The translation can be done using the following steps:
- Determination of functional currency of foreign entity
- Remeasure financial statements of foreign entity into reporting currency of parent company
- Record gains or losses on the translation of currencies
Requirement 2:
Exchange rate for translation into U.S, dollars of the following:
- Cash
- Sales revenue
- Property, plant and equipment
Want to see the full answer?
Check out a sample textbook solutionChapter 8 Solutions
MANAGERIAL ACCOUNTING ACCT 2302 >IC<
- Assignment Details The chief financial officer (CFO) discussed your analysis and strategy with the executive team and feels that you are the perfect person to work on the corporate budget. Based on the current external environment, the organization has limited resources, and each department has been asked to reduce costs. Based on your experience, answer the following questions: What type of costs should the departments reduce first and why? How can the organization prevent budgetary slack in the budgeting process since the bonuses of managers are tied to the budget? What are some potential ethical issues all organizations deal with in the budgeting process? What are some ways of dealing with these potential problems?arrow_forwardFor this assignment you are to assume that you are involved in the preparation of your company's master budget. The company's sales team provides information concerning expected unit sales and pricing for use in preparation of the sales budget. Further, you are aware that a portion of the sale team's compensation is based on their ability to meet the sales budget. What would the memorandum be to the vice president of finance outlining your concerns about this practice. Include any concerns that you have about potential bias in the information provided by the sales team.arrow_forwardFlexible budgeting, performance measurement, and ethics Montevideo Manufacturing, Inc. produces a single type of small motor. The bookkeeper who does not have an in-depth understanding of accounting principles prepared the following performance report with the help of the production manager. In a conversation with the sales manager, the production manager was overheard saying, You sales guys really messed up our May performance, and it is only because production did such a great job controlling costs that we arent in even worse shape. Required: 1. Do you agree with the production manager that the manufacturing area did a good job of controlling costs? 2. Prepare a flexible budget for Montevideo Manufacturings expenses at the following activity levels: 45,000 units, 50,000 units, and 55,000 units. 3. Prepare a revised performance report, using the most appropriate flexible budget from (2) above. 4. Now what is your response to the production managers claim? 5. Assume that you have just been hired as the new accountant. You observe that the production manager is about to receive a large bonus based on the favorable materials, labor, and factory overhead variances indicated in the flexible budget prepared by the bookkeeper. Using the IMA Statement of Ethical Professional Practice as your guide, what standards, if any, apply to your responsibilities in this matter?arrow_forward
- The management of Hess, Inc., is developing a flexible budget for the upcoming year. It was not pleased with the small amount of net income the budget showed at all sales levels and Is contemplating using a less expensive material. This action reduces direct material cost by $1 per unit. What would be the effects on financial statements and a flexible budget if management takes this approach? Are there other factors that need to be considered?arrow_forwardClassify each of the following actions as either being associated with the financial accounting information system (FS) or the cost management information system (CMS): a. Determining the total compensation of the CEO of a public company b. Issuing a quarterly earnings report c. Determining the unit product cost using TDABC d. Calculating the number of units that must be sold to break even e. Preparing a required report for the SEC f. Preparing a sales budget g. Using cost and revenue information to decide whether to keep, or drop, a product line h. Preparing an annual statement of financial position that conforms to generally accepted accounting principles (GAAP) i. Using cost and revenue information to decide whether to invest in a new production system or not j. Reducing costs by improving the overall quality of a product k. Using a debt-equity ratio and liquidity ratios from a balance sheet to assess the likelihood of bankruptcy l. Using a public companys financial statements to decide whether or not to buy its stockarrow_forwardA company can expect to receive which of the following benefits when it starts its budgeting process? a. The budget provides managers with a benchmark against which to compare actual results for performance evaluation. b. The planning required to develop the budget helps managers foresee and avoid potential problems before they occur. c. The budget helps motivate employees to achieve sales growth and cost-reduction goals. d. All of the abovearrow_forward
- Planning and Control Many companies use budgets for three purposes. First, they use them to plan how to deploy resources to best serve customers. Second, they use them to establish challenging goals, or stretch targets, to motivate employees to strive for exceptional results. Third, they use them to evaluate and reward employees. Assume that you are a sales manager working with your boss to create a sales budget for next year. Once the sales budget is established, it will influence how other departments within the company plan to deploy their resources. For example, the manufacturing manager will plan to produce enough units to meet budgeted unit sales. The sales budget will also be instrumental in determining your pay raise, potential for promotion, and bonus. If actual sales exceed the sales budget, it bodes well for your career. If actual sales are less than budgeted sales, it will diminish your financial compensation and potential for promotion. Required: 1. Do you think it would…arrow_forwardDiscuss the following:a. Are these budget standards challenging for the department that produces lip gloss? (Use the numbers provided to support your argument) b. Why do you suppose Chante picked these standards? (Critical thinking) c. What steps can Nicki Fenty Corporation’s top management take to ensure Chante’s standards really meet the goals of the firm? Discuss this briefly, with reference to the current scenario as well as to other approaches to budget preparation.arrow_forwardA company can expect to receive which of the following benefits when it starts its budgeting process? The budget provides managers with a benchmark against which to compare actual results for performance evaluation. The planning required to develop the budget helps managers foresee and avoid potential problems before they occur. The budget helps motivate employees to achieve sales growth and cost-reduction goals. All of the abovearrow_forward
- In the previous week, we have discussed planning budgets that are based on standards. How are standards developed and are they only useful for companies that manufacture products or do service type industries utilize standards? Please explain and give examples!arrow_forwardCritiquing a Report; Preparing a Performance Budget Exchange Corp. is a company that acts as a facilitator in tax-favored real estate swaps: Such swaps, know as 1031 exchanges, permit participants to avoid some or all of the capital gains taxes that would otherwise be due. The bookkeeper for the company has been asked to prepare a report for the company to help its owner/manager analyze performance. The first such report appears below: Note that the revenues and costs in the above report are unit revenues and costs. For example, the average office expense is $135 per exchange completed on the planning budget; whereas, the average actual office expanse is $112 per exchange completed. Legal and search fees is a variable cost; In the planning budget, the fixed component of office expenses was $5,200. All of the company’s revenues come from fees collected when an exchange is completed. Required: 1. Evaluate the report prepared by the bookkeeper 2. Using Exhibit 9–8 as your guide, prepare a…arrow_forwardA company prepares the master budget by taking each division manager's estimate of revenues and costs for the coming period and entering the data into the budget without adjustment. At the end of the year, division managers are given a bonus if their actual division profit exceeds the budgeted profit. What problems do you see with this system?arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegePrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning