7．The Precision Screen Printers (PSP) Company has a foreign subsidiary, the Acer Tool & Die Company, located in the country of Rolivia. The currency of Rolivia is the Chad. The balance sheet and income statement of Acer Tool & Die Company for the year-ended December 31, 2002, is shown below. The balance sheet has been restated using the U.S. dollar as the functional currency.

The exchange rate at the beginning of 2002 was 0.3333 Chad/US$. The exchange rate at the end of 2002 was 0.25 Chad/US$. The average rate for 2002 is 0.3125 Chad/US$. Beginning inventory is 90 Chad. Acer Tool & Die uses FIFO inventory valuation and depreciates fixed assets using the straight-line method.

Using the current rate method for the Acer Tool & Die Company, what is the value of total assets after translation?

A)   $1,950.

B)   $2,020.

C)   $2,167.

D)   $2,600.

The correct answer was D)

With the current rate method, all balance sheet items except for common stock are translated at the current rate. Total assets = 650 / 0.25 = $2,600.

8．Wasson Brothers (WB) is a large U.S. based conglomerate with many subsidiaries in both the U.S. and abroad. One of WB's wholly-owned foreign subsidiaries, Kasamatsu Industries, is based in Japan and manufactures a hugely successful line of trading cards, toys, and other related products. All of Kasamatsu's operations and sales take place in Japan, and the corresponding transactions are denominated in Japanese yen. Additionally, Kasamatsu's books and records are all maintained in yen. WB reports its earnings in U.S. dollars. The history of the exchange rate between the dollar and the yen over the last two years is presented in the following table. Figures are presented in /$.

Jameson would like to look at some of Kasamatsu's figures in U.S. dollars. However, she must use the appropriate rate to convert the numbers from yen into dollars. What is the appropriate exchange rate (/$) to use in converting Kasamatsu's assets?

A)   100.

B)   150.

C)   130.

D)   140.

The correct answer was B)

Because the current method of currency translation is being used all assets and liabilities are translated using the exchange rate in effect on the balance sheet date. In this particular case, the exchange rate prevailing on December 31, 2002, is the appropriate rate.

9.Jameson would like to look at some of Kasamatsu's figures in U.S. dollars. What would be the appropriate exchange rate (/$) to use in translating Kasamatsu's liabilities into U.S. dollars?

A)   100.

B)   130.

C)   150.

D)   140.

The correct answer was C)

Under the current method, assets and liabilities are translated at the exchange rate prevailing on the balance sheet date.

10.Jameson would like to look at some of Kasamatsu's figures in U.S. dollars. What would be the appropriate exchange rate (/$) to use in translating Kasamatsu's capital stock into U.S. dollars?

A)   130.

B)   140.

C)   150.

D)   100.

The correct answer was D)

Because WB issued stock and acquired Kasamatsu and their capital stock, they must carry that capital stock on their balance sheet at historical cost, which will be the basis for calculating depreciation expense. Therefore, even though this is a balance sheet item, the exchange rate that prevailed on the date of the acquisition of the capital stock must be used to translate into the reporting currency. Using the exchange rate that was effective on the balance sheet date would be improper, as this would cause the "historical" cost of the capital stock to fluctuate.

7．The Precision Screen Printers (PSP) Company has a foreign subsidiary, the Acer Tool & Die Company, located in the country of Rolivia. The currency of Rolivia is the Chad. The balance sheet and income statement of Acer Tool & Die Company for the year-ended December 31, 2002, is shown below. The balance sheet has been restated using the U.S. dollar as the functional currency.

The exchange rate at the beginning of 2002 was 0.3333 Chad/US$. The exchange rate at the end of 2002 was 0.25 Chad/US$. The average rate for 2002 is 0.3125 Chad/US$. Beginning inventory is 90 Chad. Acer Tool & Die uses FIFO inventory valuation and depreciates fixed assets using the straight-line method.

Using the current rate method for the Acer Tool & Die Company, what is the value of total assets after translation?

A)   $1,950.

B)   $2,020.

C)   $2,167.

D)   $2,600.

8．Wasson Brothers (WB) is a large U.S. based conglomerate with many subsidiaries in both the U.S. and abroad. One of WB's wholly-owned foreign subsidiaries, Kasamatsu Industries, is based in Japan and manufactures a hugely successful line of trading cards, toys, and other related products. All of Kasamatsu's operations and sales take place in Japan, and the corresponding transactions are denominated in Japanese yen. Additionally, Kasamatsu's books and records are all maintained in yen. WB reports its earnings in U.S. dollars. The history of the exchange rate between the dollar and the yen over the last two years is presented in the following table. Figures are presented in /$.

Jameson would like to look at some of Kasamatsu's figures in U.S. dollars. However, she must use the appropriate rate to convert the numbers from yen into dollars. What is the appropriate exchange rate (/$) to use in converting Kasamatsu's assets?

A)   100.

B)   150.

C)   130.

D)   140.

9.Jameson would like to look at some of Kasamatsu's figures in U.S. dollars. What would be the appropriate exchange rate (/$) to use in translating Kasamatsu's liabilities into U.S. dollars?

A)   100.

B)   130.

C)   150.

D)   140.

10.Jameson would like to look at some of Kasamatsu's figures in U.S. dollars. What would be the appropriate exchange rate (/$) to use in translating Kasamatsu's capital stock into U.S. dollars?

A)   130.

B)   140.

C)   150.

D)   100.