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ABC Inc has a single wholly-owned American subsidiary called US1 based in Los Angeles,California which was acquired January 1,2014.US1 submitted its financial statements for 2014 to ABC.Selected exchange rates in effect throughout 2014 are shown below: US1 Financial Results for 2014 were as follows: Balance Sheet For questions 17 through 22,inclusively,assume that US1 is considered to be a self-sustaining subsidiary.
-Which of the following rates would be used to translate the company's Dividends paid during the year?
A)$1CDN=$0.815 U.S.
B)$1CDN=$0.8125 U.S.
C)$1CDN=$0.8250 U.S.
D)$1CDN=$0.83 U.S.

Question

The following information pertains to questions 
ABC Inc has a single wholly-owned American subsidiary called US1 based in Los Angeles,California which was acquired January 1,2014.US1 submitted its financial statements for 2014 to ABC.Selected exchange rates in effect throughout 2014 are shown below:  US1 Financial Results for 2014 were as follows:  Balance Sheet  For questions 17 through 22,inclusively,assume that US1 is considered to be a self-sustaining subsidiary.
-Which of the following rates would be used to translate the company's Dividends paid during the year?
A)$1CDN=$0.815 U.S. 
B)$1CDN=$0.8125 U.S. 
C)$1CDN=$0.8250 U.S. 
D)$1CDN=$0.83 U.S.

Quizplus · Accepted Answer

The question does not provide the currency of the dividends paid, but since the subsidiary is based in Los Angeles, it is reasonable to assume that the dividends were paid in U.S. dollars. Therefore, we need to use the exchange rate of CDN (Canadian dollars) to USD in order to translate the dividends paid. The only rate provided for this conversion is $1CDN=$0.8125 U.S., so that is the best choice.

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