Question 1

Under the presentation currency translation (PCT) method, which of the following statements is correct?

Accepted Answer

A)  Transaction exposure is greatest. 
B)  The relationship of balance sheet items is best preserved. 
C)  Income statement items are translated using a mix of rates. 
D) Income statement items are translated using average rates. 
A)  Transaction exposure is greatest. 
B)  The relationship of balance sheet items is best preserved. 
C)  Income statement items are translated using a mix of rates. 
D) Income statement items are translated using average rates.

Question 2

On January 1, 2017, Larmer Corp. (a Canadian company) purchased 80% of Martin Inc, an American company, for US$50,000.
Martin's book values approximated its fair values on that date except for plant and equipment, which had a fair value of US$30,000 with a remaining life expectancy of 5 years. A goodwill impairment loss of US$1,000 occurred during 2017. Martin's January 1, 2017 Balance Sheet is shown below (in U.S. dollars): $$\begin{array} { | l | l | } 
\hline \text { Current Monetary Assets } & \$ 50,000 \
\hline \text { muentory } & \$ 40,000 \
\hline \text { Plant and Equipment } & \$ 25,000 \
\hline \text { Total Assets } & \$ 115,000 \
\hline & \
\hline \text { Current Liabilities } &  \$ 45,000 \
\hline \text { Bonds Pay able (maturity: January 1, 2022) } &\$ 20,000\
\hline \text { Common Shares } & 30,000\
\hline \text { Retained Earnings } &   \$ 20,000\
\hline \text { Total Labilities and Equity } &\$ 115,000 \
\hline & \
\hline
\end{array}$$ The following exchange rates were in effect during 2017:
 $$\begin{array} { | l | l | } 
\hline \text { January } 1,2017 : &U S \$ 1 = C D N \$ 1.3260 \
\hline \text { Average for } 2017 : & US \$ 1 = C D N \$ 1.3360 \
\hline \text { Date when Inventory Purchased: } & U S \$ 1 = \text { CDN } \$ 1.34 \
\hline \text { December } 31,2017 : & US \$ 1 = \text { CDN } \$ 1.35 \
\hline & \
\hline
\end{array}$$ Dividends declared and paid December 31, 2017.
The financial statements of Larmer (in Canadian dollars) and Martin (in U.S. dollars) are shown below:
Balance Sheets
  
-Calculate Larmer's Consolidated Net Income for 2017 if Martin is considered to be a self-sustaining foreign subsidiary (i.e., the functional currency of the foreign operation is different than the parent).

Accepted Answer

Calculation of Consolidated Net Income:

Question 3

If Maker is considered to be a self-sustaining foreign subsidiary (i.e., the functional currency of the foreign operation is different than the parent), what amount will be shown for amortization expense on its translated Canadian dollar financial statements as at December 31, 2017?

Accepted Answer

A)  $27,500. 
B)  $29,010. 
C)  $29,210. 
D) $29,425. 
A)  $27,500. 
B)  $29,010. 
C)  $29,210. 
D) $29,425.

Question 4

If Maker is considered to be an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), what amount will be shown for capital assets (net) on its translated Canadian dollar financial statements as at December 31, 2017?

Accepted Answer

A)  $212,500. 
B)  $224,430. 
C)  $225,830. 
D) $228,438. 
A)  $212,500. 
B)  $224,430. 
C)  $225,830. 
D) $228,438.

Question 5

For the sake of simplicity, assume once again that US1's cost of sales was calculated to be CDN$3,000,000. What is the amount (in Canadian dollars) of US1's retained earnings at December 31, 2017?

Accepted Answer

A)  $545,000. 
B)  $546,250. 
C)  $547,250. 
D) $660,000. 
A)  $545,000. 
B)  $546,250. 
C)  $547,250. 
D) $660,000.

Question 6

If the bonds were outstanding throughout the year, which of the following rates would be used to translate the company's bond interest expense for the year?

Accepted Answer

A)  US$1 = CDN$0.815 
B)  US$1 = CDN$0.8175 
C)  US$1 = CDN$0.825 
D) US$1 = CDN$0.83 
A)  US$1 = CDN$0.815 
B)  US$1 = CDN$0.8175 
C)  US$1 = CDN$0.825 
D) US$1 = CDN$0.83

Question 7

For the sake of simplicity, assume once again that US1's cost of sales was calculated to be CDN$3,000,000. What is the amount (in Canadian dollars) of US1's net income?

Accepted Answer

A)  $300,000. 
B)  $301,500. 
C)  $302,500. 
D) $412,500. 
A)  $300,000. 
B)  $301,500. 
C)  $302,500. 
D) $412,500.

Question 8

If Maker is considered to be a self-sustaining foreign subsidiary (i.e., the functional currency of the foreign operation is different than the parent), what amount will be shown for capital assets (net) on its translated Canadian dollar financial statements as at December 31, 2016?

Accepted Answer

A)  $168,000. 
B)  $169,600. 
C)  $170,000. 
D) $170,400. 
A)  $168,000. 
B)  $169,600. 
C)  $170,000. 
D) $170,400.

Question 9

Which of the following rates would be used to translate the company's cash?

Accepted Answer

A)  US$1 = CDN$0.815 
B)  US$1 = CDN$0.8175 
C)  US$1 = CDN$0.825 
D) US$1 = CDN$0.83 
A)  US$1 = CDN$0.815 
B)  US$1 = CDN$0.8175 
C)  US$1 = CDN$0.825 
D) US$1 = CDN$0.83

Question 10

What is the amount of the gain or loss arising from translation?

Accepted Answer

A)  A CDN$5,000 loss. 
B)  A CDN$750 loss. 
C)  A CDN$307 loss. 
D) A CDN$3,750 gain. 
A)  A CDN$5,000 loss. 
B)  A CDN$750 loss. 
C)  A CDN$307 loss. 
D) A CDN$3,750 gain.

Question 11

Which of the following statements is correct?

Accepted Answer

A)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), non-monetary items recorded at cost must be translated using historical rates. 
B)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), non-monetary items recorded at cost must be translated using average rates. 
C)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), non-monetary items recorded at cost must be translated using closing rates. 
D) If an organization is considered an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), non-monetary items recorded at cost must be translated using closing rates. 
A)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), non-monetary items recorded at cost must be translated using historical rates. 
B)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), non-monetary items recorded at cost must be translated using average rates. 
C)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), non-monetary items recorded at cost must be translated using closing rates. 
D) If an organization is considered an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), non-monetary items recorded at cost must be translated using closing rates.

Question 12

Which of the following rates would be used to translate the company's accounts receivable?

Accepted Answer

A)  US$1 = CDN$0.815 
B)  US$1 = CDN$0.8175 
C)  US$1 = CDN$0.825 
D) US$1 = CDN$0.83 
A)  US$1 = CDN$0.815 
B)  US$1 = CDN$0.8175 
C)  US$1 = CDN$0.825 
D) US$1 = CDN$0.83

Question 13

If Maker is considered to be an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), what amount will be shown for amortization expense on Holdings consolidated income statements for the year ended on December 31, 2017?

Accepted Answer

A)  $27,500. 
B)  $29,010. 
C)  $29,210. 
D) $29,425. 
A)  $27,500. 
B)  $29,010. 
C)  $29,210. 
D) $29,425.

Question 14

Which of the following rates would be used to translate the company's current liabilities?

Accepted Answer

A)  US$1 = CDN$0.815 
B)  US$1 = CDN$0.8175 
C)  US$1 = CDN$0.825 
D) US$1 = CDN$0.83 
A)  US$1 = CDN$0.815 
B)  US$1 = CDN$0.8175 
C)  US$1 = CDN$0.825 
D) US$1 = CDN$0.83

Question 15

Which of the following statements is correct?

Accepted Answer

A)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), monetary items must be translated using closing rates. 
B)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), monetary items must be translated using average rates. 
C)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), shareholders' equity must be translated using closing rates. 
D) If an organization is considered an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), non-monetary items recorded at cost must be translated using average rates. 
A)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), monetary items must be translated using closing rates. 
B)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), monetary items must be translated using average rates. 
C)  If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), shareholders' equity must be translated using closing rates. 
D) If an organization is considered an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), non-monetary items recorded at cost must be translated using average rates.

Question 16

Translate Wilsen's 2017 Income Statement if Wilsen was considered to be a self-sustaining foreign operation (i.e., the functional currency of the foreign operation is different than the parent).

Accepted Answer

None

Question 17

On January 1, 2017, Larmer Corp. (a Canadian company) purchased 80% of Martin Inc, an American company, for US$50,000.
Martin's book values approximated its fair values on that date except for plant and equipment, which had a fair value of US$30,000 with a remaining life expectancy of 5 years. A goodwill impairment loss of US$1,000 occurred during 2017. Martin's January 1, 2017 Balance Sheet is shown below (in U.S. dollars): $$\begin{array} { | l | l | } 
\hline \text { Current Monetary Assets } & \$ 50,000 \
\hline \text { muentory } & \$ 40,000 \
\hline \text { Plant and Equipment } & \$ 25,000 \
\hline \text { Total Assets } & \$ 115,000 \
\hline & \
\hline \text { Current Liabilities } &  \$ 45,000 \
\hline \text { Bonds Pay able (maturity: January 1, 2022) } &\$ 20,000\
\hline \text { Common Shares } & 30,000\
\hline \text { Retained Earnings } &   \$ 20,000\
\hline \text { Total Labilities and Equity } &\$ 115,000 \
\hline & \
\hline
\end{array}$$ The following exchange rates were in effect during 2017:
 $$\begin{array} { | l | l | } 
\hline \text { January } 1,2017 : &U S \$ 1 = C D N \$ 1.3260 \
\hline \text { Average for } 2017 : & US \$ 1 = C D N \$ 1.3360 \
\hline \text { Date when Inventory Purchased: } & U S \$ 1 = \text { CDN } \$ 1.34 \
\hline \text { December } 31,2017 : & US \$ 1 = \text { CDN } \$ 1.35 \
\hline & \
\hline
\end{array}$$ Dividends declared and paid December 31, 2017.
The financial statements of Larmer (in Canadian dollars) and Martin (in U.S. dollars) are shown below:
Balance Sheets
  
-Translate Martin's December 31, 2017 Balance Sheet into Canadian dollars if Martin is considered to be an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent).

Accepted Answer

None

Question 18

Translate Wilsen's December 31, 2017 Statement of Retained Earnings if Wilsen is considered to be an integrated subsidiary (i.e., the functional currency of the foreign operation is the same as the parent).

Accepted Answer

\[\begin{array} { | l | l | l | l | } 
\

Question 19

For a self-sustaining foreign operation (i.e., the functional currency of the foreign operation is different than the parent), exchange gains and losses are to be included in or along with:

Accepted Answer

A)  other comprehensive income. 
B)  an exchange account. 
C)  non-controlling interest. 
D) the acquisition differential amortization. 
A)  other comprehensive income. 
B)  an exchange account. 
C)  non-controlling interest. 
D) the acquisition differential amortization.

Question 20

Which of the following is an indication that the functional currency of a foreign subsidiary is not the Canadian dollar?

Accepted Answer

A)  Only goods imported from the parent are sold by the subsidiary. 
B)  The parent dictates the subsidiary's operating procedures. 
C)  Cash to pay obligations is generated by local operations or borrowed from local lenders. 
D) Intercompany transactions account for a high proportion of the subsidiary's overall activities. 
A)  Only goods imported from the parent are sold by the subsidiary. 
B)  The parent dictates the subsidiary's operating procedures. 
C)  Cash to pay obligations is generated by local operations or borrowed from local lenders. 
D) Intercompany transactions account for a high proportion of the subsidiary's overall activities.

Under the presentation currency translation (PCT) method, which of the following statements is correct?

If Maker is considered to be a self-sustaining foreign subsidiary (i.e., the functional currency of the foreign operation is different than the parent), what amount will be shown for amortization expense on its translated Canadian dollar financial statements as at December 31, 2017?

If Maker is considered to be an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), what amount will be shown for capital assets (net) on its translated Canadian dollar financial statements as at December 31, 2017?

For the sake of simplicity, assume once again that US1's cost of sales was calculated to be CDN$3,000,000. What is the amount (in Canadian dollars) of US1's retained earnings at December 31, 2017?

If the bonds were outstanding throughout the year, which of the following rates would be used to translate the company's bond interest expense for the year?

For the sake of simplicity, assume once again that US1's cost of sales was calculated to be CDN$3,000,000. What is the amount (in Canadian dollars) of US1's net income?

If Maker is considered to be a self-sustaining foreign subsidiary (i.e., the functional currency of the foreign operation is different than the parent), what amount will be shown for capital assets (net) on its translated Canadian dollar financial statements as at December 31, 2016?

Which of the following rates would be used to translate the company's cash?

What is the amount of the gain or loss arising from translation?

Which of the following statements is correct?

Which of the following rates would be used to translate the company's accounts receivable?

If Maker is considered to be an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), what amount will be shown for amortization expense on Holdings consolidated income statements for the year ended on December 31, 2017?

Which of the following rates would be used to translate the company's current liabilities?

Which of the following statements is correct?

Translate Wilsen's 2017 Income Statement if Wilsen was considered to be a self-sustaining foreign operation (i.e., the functional currency of the foreign operation is different than the parent).

Translate Wilsen's December 31, 2017 Statement of Retained Earnings if Wilsen is considered to be an integrated subsidiary (i.e., the functional currency of the foreign operation is the same as the parent).

For a self-sustaining foreign operation (i.e., the functional currency of the foreign operation is different than the parent), exchange gains and losses are to be included in or along with:

Which of the following is an indication that the functional currency of a foreign subsidiary is not the Canadian dollar?

Conceptual and Case Analysis Frameworks for Financial Reporting

Investments in Equity Securities

Business Combinations

Consolidation of Non-Wholly Owned Subsidiaries

Consolidation Subsequent to Acquisition Date

Intercompany Inventory and Land Profits

A Intercompany Profits in Depreciable Assets B Intercompany Bondholdings

Consolidated Cash Flows and Changes in Ownership

Other Consolidation Reporting Issues

Foreign Currency Transactions

Accounting for Not-For-Profit and Public Sector Organizations

Filters

Exam 11: Translation and Consolidation of Foreign Operations

Under the presentation currency translation (PCT) method, which of the following statements is correct?

If Maker is considered to be a self-sustaining foreign subsidiary (i.e., the functional currency of the foreign operation is different than the parent), what amount will be shown for amortization expense on its translated Canadian dollar financial statements as at December 31, 2017?

If Maker is considered to be an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), what amount will be shown for capital assets (net) on its translated Canadian dollar financial statements as at December 31, 2017?

For the sake of simplicity, assume once again that US1's cost of sales was calculated to be CDN$3,000,000. What is the amount (in Canadian dollars) of US1's retained earnings at December 31, 2017?

If the bonds were outstanding throughout the year, which of the following rates would be used to translate the company's bond interest expense for the year?

For the sake of simplicity, assume once again that US1's cost of sales was calculated to be CDN$3,000,000. What is the amount (in Canadian dollars) of US1's net income?

If Maker is considered to be a self-sustaining foreign subsidiary (i.e., the functional currency of the foreign operation is different than the parent), what amount will be shown for capital assets (net) on its translated Canadian dollar financial statements as at December 31, 2016?

Which of the following rates would be used to translate the company's cash?

What is the amount of the gain or loss arising from translation?

Which of the following statements is correct?

Which of the following rates would be used to translate the company's accounts receivable?

If Maker is considered to be an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), what amount will be shown for amortization expense on Holdings consolidated income statements for the year ended on December 31, 2017?

Which of the following rates would be used to translate the company's current liabilities?

Which of the following statements is correct?

Translate Wilsen's 2017 Income Statement if Wilsen was considered to be a self-sustaining foreign operation (i.e., the functional currency of the foreign operation is different than the parent).

Translate Wilsen's December 31, 2017 Statement of Retained Earnings if Wilsen is considered to be an integrated subsidiary (i.e., the functional currency of the foreign operation is the same as the parent).

For a self-sustaining foreign operation (i.e., the functional currency of the foreign operation is different than the parent), exchange gains and losses are to be included in or along with:

Which of the following is an indication that the functional currency of a foreign subsidiary is not the Canadian dollar?

Conceptual and Case Analysis Frameworks for Financial Reporting

Investments in Equity Securities

Business Combinations

Consolidation of Non-Wholly Owned Subsidiaries

Consolidation Subsequent to Acquisition Date

Intercompany Inventory and Land Profits

A Intercompany Profits in Depreciable Assets B Intercompany Bondholdings

Consolidated Cash Flows and Changes in Ownership

Other Consolidation Reporting Issues

Foreign Currency Transactions

Accounting for Not-For-Profit and Public Sector Organizations

Filters