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标题: Reading 24: Multinational Operations LOS d ~ Q14-15 [打印本页]

作者: mayanfang1    时间: 2009-1-17 15:29     标题: [2009] Session 6 - Reading 24: Multinational Operations LOS d ~ Q14-15

Q14. Giant Company is a U.S. Company with a subsidiary, Grande, Inc., that operates in Mexico. Giant Company uses

     either the temporal or the all-current method of foreign currency translation for its subsidiaries.

§ Grande, Inc., began operations January 1, 2001.

§ Common Stock and Fixed Assets were acquired January 1, 2000.

§ Inventory is accounted for under the last in, first out (LIFO) cost flow assumption, with a slow rate of turnover.

§ The inventory in the January 1, 2001, Balance Sheet was acquired on January 1, 2001.

Exchange Rates were:

January 1, 2000

$0.14/M peso

 

January 1, 2001

$0.12/M peso

 

June 30, 2001

$0.11/M peso (this is the 2001 average rate)

 

December 31, 2001

$0.10/M peso

 

 

Grande, Inc.

 

Balance Sheet (in M Pesos)

 

Jan. 1, 2001

Dec. 31, 2001

Cash

5,000,000

20,000,000

Accounts Receivable (A/R)

20,000,000

35,000,000

Inventory

15,000,000

15,000,000

Fixed Assets (net)

70,000,000

60,000,000

 

 

 

Accounts Payable (A/P)

10,000,000

10,000,000

Long Term Debt

40,000,000

35,000,000

Common Stock

80,000,000

80,000,000

Retained Earnings

 

5,000,000

 

 

 

 

2001 Income Statement

 

(in M Pesos)

Sales

60,000,000

Cost of Goods Sold (COGS)

(45,000,000)

Depreciation

(10,000,000)

Net Income

5,000,000

Assume that Giant Company considers the Mexican peso to be the local currency and the functional currency of Grande, Inc.Giant Company should use the following method to reflect the results of Grande, Inc., in its financial statements:

A)   the all-current method followed by the temporal method.

B)   the temporal method.

C)   the all-current method.

 

Q15. The Net Income of Grande, Inc., expressed in U.S. dollars for the year ended December 31, 2001, is:

A)   $500,000.

B)   $250,000.

C)   $550,000.


作者: mayanfang1    时间: 2009-1-17 15:30

答案和详解如下:

Q14. Giant Company is a U.S. Company with a subsidiary, Grande, Inc., that operates in Mexico. Giant Company uses

     either the temporal or the all-current method of foreign currency translation for its subsidiaries.

§ Grande, Inc., began operations January 1, 2001.

§ Common Stock and Fixed Assets were acquired January 1, 2000.

§ Inventory is accounted for under the last in, first out (LIFO) cost flow assumption, with a slow rate of turnover.

§ The inventory in the January 1, 2001, Balance Sheet was acquired on January 1, 2001.

Exchange Rates were:

January 1, 2000

$0.14/M peso

 

January 1, 2001

$0.12/M peso

 

June 30, 2001

$0.11/M peso (this is the 2001 average rate)

 

December 31, 2001

$0.10/M peso

 

 

Grande, Inc.

 

Balance Sheet (in M Pesos)

 

Jan. 1, 2001

Dec. 31, 2001

Cash

5,000,000

20,000,000

Accounts Receivable (A/R)

20,000,000

35,000,000

Inventory

15,000,000

15,000,000

Fixed Assets (net)

70,000,000

60,000,000

 

 

 

Accounts Payable (A/P)

10,000,000

10,000,000

Long Term Debt

40,000,000

35,000,000

Common Stock

80,000,000

80,000,000

Retained Earnings

 

5,000,000

 

 

 

 

2001 Income Statement

 

(in M Pesos)

Sales

60,000,000

Cost of Goods Sold (COGS)

(45,000,000)

Depreciation

(10,000,000)

Net Income

5,000,000

Assume that Giant Company considers the Mexican peso to be the local currency and the functional currency of Grande, Inc.Giant Company should use the following method to reflect the results of Grande, Inc., in its financial statements:

A)   the all-current method followed by the temporal method.

B)   the temporal method.

C)   the all-current method.

Correct answer is C)

The basis for using the all current method is when Functional Currency is NOT the same as Parent's Presentation (reporting) Currency. The basis for using the temporal method is when Functional Currency = Parent's Presentation Currency.

The all-current method is used when the local currency and functional currency are the same.

Q15. The Net Income of Grande, Inc., expressed in U.S. dollars for the year ended December 31, 2001, is:

A)   $500,000.

B)   $250,000.

C)   $550,000.

Correct answer is C)

Using the all-current method, the income statement is translated using the average rate for all income statement accounts: Sales − COGS − Depreciation = Net Income. (60,000,000 × $0.11) − (45,000,000 × $0.11) − (10,000,000) × $0.11) = $550,000.


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