Question
Assume a U.S. firm (the parent) has a foreign subsidiary with Assets, Liabilities, and Owners' Equity of $25, $15, and $10 in Foreign Currency, respectively.
Assume a U.S. firm (the parent) has a foreign subsidiary with Assets, Liabilities, and Owners' Equity of $25, $15, and $10 in Foreign Currency, respectively. If the appropriate exchange rates for Assets, Liabilities, and Owners' Equity are, respectively, $3, $3, and $1.5, which of the below is correct? Select one: a. The parent firm will recognize a $15 increase to AOCI upon translation. b. The parent firm will recognize a loss of $15 (upon translation) that is recognized in the income statement. c. The parent firm will recognize a gain of $5 (upon translation) that is recognized in the income statement. d. The parent firm will recognize a $15 decrease to AOCI upon translation.
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