48．l Air Lines has recently acquired Australian Puddle Jumpers, Inc., a small airline located in Sydney . The Australian dollar has been chosen by Dell as the functional currency for APJ. The Balance Sheet of APJ is given below as of Dec. 31, 2001 in U.S. dollars.

APJ's income statement for the year ending Dec. 31, 2002 is expressed in Australian dollars as:

The Australian dollar has steadily depreciated against the U.S. dollar. At Dec. 31, 2001, the exchange rate was 2.5 Australian dollars = $1 but at Dec. 31, 2002, the exchange rate had deteriorated to 3 Australian dollars = $1.

The Dec. 31, 2002 Balance Sheet for APJ is given in Australian dollars as follows:

On APJ's 2002 income statement, the level of sales in U.S. dollars would be:</FONT

A)   $1,167.</FONT< TD>

B)   $1,272.</FONT< TD>

C)   $1,750.</FONT< TD>

D)   $1,985.</FONT< TD>

The correct answer was B)     

Since the Australian $ is the functional currency, use the current rate method. The items in the income statement are translated at the average exchange rate under FASB 52. The average rate is (2.5 + 3)/2 = 2.75 Australian dollars = $1.

Income Statement (in $)

49．APJ's 2002 income statement, the level of net income in U.S. dollars would be:

A)   $200.

B)   $242.

C)   $311.

D)   $217.

The correct answer was D)

Since the Australian $ is the functional currency, use the current rate method. The items in the income statement are translated at the average exchange rate under FASB 52. The average rate is (2.5 + 3)/2 = 2.75 Australian dollars = $1.

Income Statement (in $)

50．APJ's 2002 balance sheet, the level of accounts receivable is U.S. dollars would be:

A)   $132.

B)   $165.

C)   $110.

D)   $330.

The correct answer was C)

Since the Australian $ is the functional currency, use the current rate method.

In the balance sheet, all accounts are translated at the current exchange rate, except for the common stock account, which is translated at the historical rate.

A/R (330/3) =110