Exam 12: Multinational Accounting: Issues in Financial Reporting and Translation of Foreign Entity Statements

Which combination of accounts and exchange rates is correct for the remeasurement of a foreign entity's financial statements from its local currency to U.S.dollars?

On September 30, 20X8, Wilfred Company sold inventory to Jackson Corporation, its Canadian subsidiary. The goods cost Wilfred $30,000 and were sold to Jackson for $40,000, payable in Canadian dollars. The goods are still on hand at the end of the year on December 31. The Canadian dollar (C$) is the functional currency of the Canadian subsidiary. The exchange rates follow: -Based on the preceding information,at what amount is the inventory shown on the consolidated balance sheet for the year?

On September 30, 20X8, Wilfred Company sold inventory to Jackson Corporation, its Canadian subsidiary. The goods cost Wilfred $30,000 and were sold to Jackson for $40,000, payable in Canadian dollars. The goods are still on hand at the end of the year on December 31. The Canadian dollar (C$) is the functional currency of the Canadian subsidiary. The exchange rates follow: -Based on the preceding information,what amount of unrealized intercompany gross profit is eliminated in preparing the consolidated financial statements for the year?

On October 15, 20X1, Jerry Company sold inventory to Garcia Corporation, its Mexican subsidiary. The goods cost Jerry $2,700 and were sold to Garcia for $3,500, payable in Mexican pesos. The goods are still on hand at the end of the year on December 31. The Mexican peso is the functional currency of Garcia. The exchange rates follow: -Based on the preceding information,at what dollar amount is the ending inventory shown in the subsidiary's trial balance column of the consolidation worksheet?

On January 2, 20X8, Johnson Company acquired a 100% interest in the capital stock of Perth Company for $3,100,000. Any excess cost over book value is attributable to a patent with a 10-year remaining life. At the date of acquisition, Perth's balance sheet contained the following information: Perth's income statement for 20X8 is as follows: The balance sheet of Perth at December 31, 20X8, is as follows: Perth declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at various dates for 20X8 follow: Assume Perth's revenues, purchases, operating expenses, depreciation expense, and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming the U.S.dollar is the functional currency,what is Johnson's remeasurement gain (loss)for 20X8? (Assume the ending inventory was acquired on December 31,20X8.)

South Company is a subsidiary of North Company and is located in Malaysia, where the currency is the ringgit. Data on South's inventory and purchases are as follows: The beginning inventory was acquired during the fourth quarter of 20X3, and the ending inventory was acquired during the fourth quarter of 20X4. Purchases were made evenly during 20X4. Exchange rates were as follows: -Based on the preceding information,the translation of cost of goods sold for 20X4,assuming that the Malaysian ringgit is the function currency is

Dover Company owns 90% of the capital stock of a foreign subsidiary located in Italy.Dover's accountant has just translated the accounts of the foreign subsidiary and determined that a debit translation adjustment of $80,000 exists.If Dover uses the fully adjusted equity method for its investment,what entry should Dover record in order to recognize the translation adjustment?

Which of the following statements is true regarding the SEC's timeline for convergence?

On January 2, 20X8, Johnson Company acquired a 100% interest in the capital stock of Perth Company for $3,100,000. Any excess cost over book value is attributable to a patent with a 10-year remaining life. At the date of acquisition, Perth's balance sheet contained the following information: Perth's income statement for 20X8 is as follows: The balance sheet of Perth at December 31, 20X8, is as follows: Perth declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at various dates for 20X8 follow: Assume Perth's revenues, purchases, operating expenses, depreciation expense, and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming Perth's local currency is the functional currency,what is the balance in Johnson's investment in foreign subsidiary account at December 31,2008?

When the local currency of the foreign subsidiary is the functional currency,a foreign subsidiary's income statement accounts would be converted to U.S.dollars by:

On October 15, 20X1, Jerry Company sold inventory to Garcia Corporation, its Mexican subsidiary. The goods cost Jerry $2,700 and were sold to Garcia for $3,500, payable in Mexican pesos. The goods are still on hand at the end of the year on December 31. The Mexican peso is the functional currency of Garcia. The exchange rates follow: -Based on the preceding information,what amount of unrealized intercompany gross profit is eliminated in preparing the consolidated financial statements for the year?

When the local currency of the foreign subsidiary is the functional currency,a foreign subsidiary's inventory carried at cost would be converted to U.S.dollars by:

Infinity Corporation acquired 80 percent of the common stock of an Egyptian company on January 1,20X8.The goodwill associated with this acquisition was $18,350.Exchange rates at various dates during 20X8 follow: Goodwill suffered an impairment of 20 percent during the year.If the functional currency is the U.S.dollar,how much goodwill impairment loss should be reported on Infinity's consolidated statement of income for 20X8?

Parisian Co.is a French company located in Paris.Yankee Corp.,located in New York City,acquires Parisian Co.Parisian has the Euro as its local currency and the Swiss Franc as its functional currency.Yankee has the U.S.dollar as its local currency and the U.S.dollar as its functional currency. Required: a)The year-end consolidated financial statements will be prepared in which currency? b)Explain which method is appropriate to use to use at year-end: Translation or Remeasurement?

On January 2, 20X8, Johnson Company acquired a 100% interest in the capital stock of Perth Company for $3,100,000. Any excess cost over book value is attributable to a patent with a 10-year remaining life. At the date of acquisition, Perth's balance sheet contained the following information: Perth's income statement for 20X8 is as follows: The balance sheet of Perth at December 31, 20X8, is as follows: Perth declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at various dates for 20X8 follow: Assume Perth's revenues, purchases, operating expenses, depreciation expense, and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming the U.S.dollar is the functional currency,what is the amount of Perth's cost of goods sold remeasured in U.S.dollars?

Infinity Corporation acquired 80 percent of the common stock of an Egyptian company on January 1,20X8.The goodwill associated with this acquisition was $18,350.Exchange rates at various dates during 20X8 follow: Goodwill suffered an impairment of 20 percent during the year.If the functional currency is the Egyptian Pound,how much goodwill impairment loss should be reported on Infinity's consolidated statement of income for 20X8?

Under the temporal method,which of the following is usually used to translate monetary amounts to the functional currency? I.The current exchange rate II The historical exchange rate III.Average exchange rate

On January 1, 20X8, Transport Corporation acquired 75 percent interest in Steamship Company for $300,000. Steamship is a Norwegian company. The local currency is the Norwegian kroner (NKr). The acquisition resulted in an excess of cost-over-book value of $25,000 due solely to a patent having a remaining life of 5 years. Transport uses the fully adjusted equity method to account for its investment. Steamship's December 31, 20X8, trial balance has been translated into U.S. dollars, requiring a translation adjustment debit of $8,000. Steamship's net income translated into U.S. dollars is $35,000. It declared and paid an NKr 20,000 dividend on June 1, 20X8. Relevant exchange rates are as follows: Assume the kroner is the functional currency. -Based on the preceding information,in the journal entry to record the receipt of dividend from Steamship,

On January 2, 20X8, Johnson Company acquired a 100% interest in the capital stock of Perth Company for $3,100,000. Any excess cost over book value is attributable to a patent with a 10-year remaining life. At the date of acquisition, Perth's balance sheet contained the following information: Perth's income statement for 20X8 is as follows: The balance sheet of Perth at December 31, 20X8, is as follows: Perth declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at various dates for 20X8 follow: Assume Perth's revenues, purchases, operating expenses, depreciation expense, and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming the U.S.dollar is the functional currency,what is the balance in Johnson's investment in foreign subsidiary account at December 31,2008?

On January 2, 20X8, Johnson Company acquired a 100% interest in the capital stock of Perth Company for $3,100,000. Any excess cost over book value is attributable to a patent with a 10-year remaining life. At the date of acquisition, Perth's balance sheet contained the following information: Perth's income statement for 20X8 is as follows: The balance sheet of Perth at December 31, 20X8, is as follows: Perth declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at various dates for 20X8 follow: Assume Perth's revenues, purchases, operating expenses, depreciation expense, and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming Perth's local currency is the functional currency,what is the amount of patent amortization for 20X8 that results from Johnson's acquisition of Perth's stock on January 2,20X8.Round your answer to the nearest dollar.