Accounts are listes below for a foreign subsidiary that maintains its books in i
ID: 2418987 • Letter: A
Question
Accounts are listes below for a foreign subsidiary that maintains its books in its local currency. The equity interest in the subsidiary was acquired in a purchase transaction. In the space provided, indicate the exchange rate that would be used to translate the accounts into dollars assuming that the functional currency was identified (a) as the U.S. dollar and (b) as the foreign entity's local currency. Use the following letters to Identify the exchange rate:
H - historical exchange rate
C - current exchange rate
A - average exchange rate fot the current period
Cash
Account receivable
Inventory carried at cost
Inventory carried at market
Prepaid rent
Property, plant, and equipment
Goodwill
Account Payable
Bonds payable
Unamortized premium on Bonds payable
Preferred stock carried at issuance price
Common stock
Sales
Cost of Goods Sold
Depreciation expense
Identify Exchange Rate if the Functional Currency Is: U.S. Dollar / Local Currency
Explanation / Answer
Solution:
(1) Accounts receivable - Current exchange rate
(2) Inventory carried at cost - Historical exchange rate
(3) Inventory carried at market - Current exchange rate
(4) Prepaid rent - Current exchange rate
(5) Property, plant and equipment - Historical exchange rate
(6) Goodwill - Average exchange rate for the current period
(7) Accounts payable - Current exchange rate
(8) Bonds payable - Current exchange rate
(9) Unamortized premium on Bonds payable - Average exchange rate
(10) Preferred stock carried at issuance price - Historical exchange rate
(1!) Common stock - Current exchange rate
(12) Sales - Current exchange rate
(13) Cost of Goods sold - Average exchange rate
(14) Depreciation expense - Average exchange rate
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