Question
On January 1, Dandu Corporation started a subsidiary in a foreign country. On April 1, the subsidiary purchased inventory at a cost of 120,000 local
On January 1, Dandu Corporation started a subsidiary in a foreign country. On April 1, the subsidiary purchased inventory at a cost of 120,000 local currency units (LCU). One-fourth of this inventory remained unsold at the end of the year while 40 percent of the liability from the purchase had not yet been paid. The U.S. $ per LCU exchange rates were as follows: |
January 1 | $0.40 | |
April 1 | 0.38 | |
Average for the current year | 0.36 | |
December 31 | 0.35 |
What should be the December 31 Inventory and Accounts Payable balances for this foreign subsidiary as translated into U.S. dollars using the current rate method? |
Inventory =
Accounts payable =
Board Company has a foreign subsidiary that began operations at the start of 2015 with assets of 132,000 kites (the local currency unit) and liabilities of 54,000 kites. During this initial year of operation, the subsidiary reported a profit of 26,000 kites. It distributed two dividends, each for 5,000 kites with one dividend declared on March 1 and the other on October 1. Applicable exchange rates for 1 kite follow: |
January 1, 2015 (start of business) | $0.80 | |
March 1, 2015 | 0.78 | |
Weighted average rate for 2015 | 0.77 | |
October 1, 2015 | 0.76 | |
December 31, 2015 | 0.75 |
a. | Assume that the kite is this subsidiarys functional currency. What translation adjustment would board report for the year 2015? |
Transaction Adjustment = - or + plus amount =
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