Question 1

Translate Wilsen's December 31, 2017 Statement of Retained Earnings 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

The answer of Translate Wilsen's December 31, 2017 Statement of...

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
 
-Compute Martin's exchange gain or loss for 2017 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

The answer of On January 1, 2017, Larmer Corp. (a...

Question 3

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, 2016?
A) $168,000.
B) $169,600.
C) $170,000.
D)$170,400.

Accepted Answer

The answer of If Maker is considered to be an...

Question 4

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, 2017?
A) $212,500.
B) $224,430.
C) $225,830.
D)$228,438.

Accepted Answer

The answer of If Maker is considered to be a...

Question 5

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

Accepted Answer

Since Maker is an integrated foreign subsidiary, the amortization expense will be included in the calculation of the subsidiary's net income, which is then translated at the average exchange rate to arrive at the holding company's consolidated income statement. The amortization expense for Maker's patent is $1,100,000/40 years = $27,500 per year. However, since the functional currency is the same as the parent, no translation adjustment is needed. Therefore, the amortization expense will be $27,500 for Maker, which will be directly included in the holding company's consolidated income statement. The question asks for the amount for the year ended on December 31, 2017, so we don't need to prorate for the partial year. 
Thus, the answer is C.

Question 6

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, 2016?
A) $20,000.
B) $21,000.
C) $21,200.
D)$21,250.

Accepted Answer

Since Maker is a self-sustaining foreign subsidiary, its functional currency is different from that of the parent. Therefore, its financial statements are first translated into the parent's currency (Canadian dollars) using the current exchange rate. The remaining balance in the deferred development costs account would need to be amortized over the remaining economic life of the product as of December 31, 2016. The total cost to be amortized is $212,500 CAD ($170,000 USD x 1.25 CAD/USD), which is then divided by the remaining economic life of two years to get an amortization expense of $106,250 CAD per year. Since one year has already passed as of December 31, 2016, the amount to be shown for amortization expense on the translated financial statements would be half of this, or $53,125 CAD.

Question 7

Calculate the exchange gain or loss that would result from the translation of Wilsen's Financial Statements 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

The answer of Calculate the exchange gain or loss that...

Question 8

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

The answer of Translate Wilsen's 2017 Income Statement if Wilsen...

Question 9

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 2017 Income Statement 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

The answer of On January 1, 2017, Larmer Corp. (a...

Question 10

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

Accepted Answer

The answer of Translate Wilsen's December 31, 2017 Balance Sheet...

Question 11

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?
A) $32,500.
B) $34,510.
C) $34,775.
D)$34,938.

Accepted Answer

Amortization expense for Maker will be calculated using the translated historical cost of the asset ($400,000 x 0.1094), which is $43,760. This amount will be amortized over the remaining useful life of the asset (5 years) resulting in an annual amortization expense of $8,752. This amount will then be translated into Canadian dollars using the December 31, 2017 exchange rate of $1.00 = $0.7954 resulting in amortization expense of $6,947. This amount will be added to Maker's operating expenses of $27,828 to arrive at total expenses of $34,775.

Question 12

Compute Wilsen's exchange gain or loss for 2017 if Wilson is considered to be an integrated subsidiary (i.e., the functional currency of the foreign operation is the same as the parent).

Accepted Answer

The answer of Compute Wilsen's exchange gain or loss for...

Question 13

Translate Wilsen's December 31, 2017 Balance Sheet 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

The answer of Translate Wilsen's December 31, 2017 Balance Sheet...

Question 14

Translate Wilsen's 2014 Income Statement 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

The answer of Translate Wilsen's 2014 Income Statement if Wilsen...

Question 15

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

Accepted Answer

The answer of If Maker is considered to be an...

Question 16

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 its translated Canadian dollar financial statements as at December 31, 2016?
A) $20,000.
B) $21,000.
C) $21,200.
D)$21,250.

Accepted Answer

When the functional currency is the same as the parent, the financial statements are translated using the current exchange rate for assets and liabilities, and the historical exchange rate for equity and income statement items. The amortization expense would be translated at the historical rate, which results in $21,200.

Question 17

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

Accepted Answer

Since Maker is considered to be a self-sustaining foreign subsidiary, its functional currency is different from the parent. Therefore, the amortization expense will be translated using the historical exchange rate. The amortization expense in USD for the year ending December 31, 2017 is $40,000. Using the historical exchange rate of 1 USD = 1.27 CAD, the amortization expense in CAD is $40,000 × 1.27 = $50,800. However, we need to subtract the amortization expense related to the land, which is a non-depreciable asset. The amortization expense related to the building is $50,800 − $7,375 = $43,425. Finally, we need to adjust for the change in exchange rate from the beginning of the year (1 USD = 1.30 CAD) to the end of the year (1 USD = 1.25 CAD). The average exchange rate for the year is (1.30 + 1.25)/2 = 1.275 CAD/USD. Therefore, the amortization expense shown on Maker's translated Canadian dollar financial statements as at December 31, 2017, is $43,425 × 1.275 = $55,370. The amount closest to this is D ($29,425).

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

The answer of Translate Wilsen's December 31, 2017 Statement of...

Question 19

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

Accepted Answer

The answer of If Maker is considered to be a...

Question 20

A foreign subsidiary is considered to be an integrated foreign operation (i.e., the functional currency of the foreign operation is the same as the parent), and its income is earned evenly over the year. It paid its income taxes for the year in two instalments, half on June 30 and half on December 31. What rate(s) should be used to translate the company's income tax expense into Canadian dollars when preparing translated financial statements for the year?
A) Half at the rate at June 30 and half at the rate at December 31.
B) All at the average rate for the year.
C) All at the closing rate for the year.
D)All at the opening rate for the year.

Accepted Answer

The income tax expense should be translated using the average exchange rate for the year as it is earned evenly throughout the year. Using the opening or closing rate can skew the translation due to potential fluctuation in exchange rates throughout the year, and using half at June 30 and half at December 31 would not accurately reflect the average rate for the year.

Quiz 11: Translation and Consolidation of Foreign Operations

Translate Wilsen's December 31, 2017 Statement of Retained Earnings 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).

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, 2016?

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, 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 amortization expense on Holdings consolidated income statements for the year ended on December 31, 2017?

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, 2016?

Calculate the exchange gain or loss that would result from the translation of Wilsen's Financial Statements 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 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 Balance Sheet if Wilsen is considered to be an integrated foreign operation (i.e., the functional currency of the foreign operation is the same as the parent).

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?

Compute Wilsen's exchange gain or loss for 2017 if Wilson is considered to be an integrated subsidiary (i.e., the functional currency of the foreign operation is the same as the parent).

Translate Wilsen's December 31, 2017 Balance Sheet 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 2014 Income Statement if Wilsen is considered to be an integrated subsidiary (i.e., the functional currency of the foreign operation is the same as the parent).

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?

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 its translated Canadian dollar financial statements as at December 31, 2016?

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?

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).

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?