Question
Company ABC is the parent of several subsidiaries across the world. One of those entities is Foreign Co., which is located in a country with
Company ABC is the parent of several subsidiaries across the world. One of those entities is Foreign Co., which is located in a country with significant swings in the domestic currency relative to the US dollar. Assume you are tasked to find out how fluctuations in the exchange rate affect Foreign Co.s financial ratios under the current and temporal methods. Below is the partial trial balance for ForeignCo., as of December 31, 2022 (for brevity, equity accounts are omitted). Accounts with a credit balance are in parentheses. To assess the currency fluctuation, you decide to perform a sensitivity analysis (i.e., a what-if analysis) of the companys financial data under two scenarios: currency appreciation (scenario A) and currency depreciation (scenario B).
Foreign Co. Trial Balance December 31, 2022 | |
| FCUs* |
Cash | 10,000 |
Accounts Receivable | 25,000 |
Inventory | 50,000 |
Equipment | 100,000 |
Accumulated Depreciation | (10,000) |
Accounts Payable | (20,000) |
Long-term Debt | (60,000) |
Sales Revenue | (100,000) |
Cost of Goods Sold | 40,000 |
Salary Expense | 30,000 |
Rent Expense | 14,000 |
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