Question
ABC Inc. has a single wholly-owned American subsidiary called US1 based in Los Angeles, California, which was acquired January 1, 2020. US1 submitted its financial
ABC Inc. has a single wholly-owned American subsidiary called US1 based in Los Angeles, California, which was acquired January 1, 2020. US1 submitted its financial statements for 2020 to ABC. Selected exchange rates in effect throughout 2020 are shown below:
January 1, 2020: | US $1 = | CDN $0.815 |
December 31, 2020: | US $1 = | CDN $0.8175 |
Average for 2020: | US $1 = | CDN $0.825 |
Date of Purchase of Inventory on Hand: | US $1 = | CDN $0.83 |
Date Dividends were declared: | US $1 = | CDN $0.8125 |
US1 financial results for 2020 were as follows: US1 Financial Statements at December 31, 2020 (in U.S. dollars)
Income Statement: | |
Sales | $5,000,000 |
Cost of Sales | $3,500,000 |
Depreciation Expense | $150,000 |
Bond Interest Expense | $100,000 |
Other Expense | $750,000 |
Net Income | $500,000 |
Statement of Retained Earnings: | |
January 1, 2020: | $400,000 |
Net Income | $500,000 |
Dividends | ($100,000) |
December 31, 2020: | $800,000 |
Balance Sheet | |
Cash | $1,200,000 |
Accounts Receivable | $1,900,000 |
Inventory | $700,000 ($500,000 January 1, 2020) |
Plant and Equipment (net) | $400,000 |
$4,200,000 | |
Current Liabilities | $400,000 |
Bonds Payable | $2,000,000 |
Common Shares | $1,000,000 |
Retained Earnings | $800,000 |
$4,200,000 |
Sales, purchases, bond interest, and other expenses occurred evenly throughout the year. US1 is considered to be a foreign subsidiary that has the same functional currency as ABC Inc.'s functional currency. If the company had no capital asset additions or disposals in 2020,
which of the following rates would be used to translate the company's depreciation expense for the year?
Which of the following rates would be used to translate the company's sales?
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