Q32. 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 /$.

Yen/Dollar Exchange Rate
December 31, 2002	150
December 31, 2001	130
2002 Average	140
2001 Average	120
Exchange rate on date that 2002 dividends were paid to Wasson Brothers	145
Exchange rate on date of stock issue and acquisition of fixed assets.	100

If Jameson wishes to convert any of the figures on Kasamatsu's Income Statement from yen to dollars, she should use which of the following exchange rates (/$)?

A)   140.

B)   150.

C)   130.

Q33. 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 reported dividends into U.S. dollars?

A)   145.

B)   150.

C)   140.

答案和详解如下：

Q32. 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 /$.

If Jameson wishes to convert any of the figures on Kasamatsu's Income Statement from yen to dollars, she should use which of the following exchange rates (/$)?

A)   140.

B)   150.

C)   130.

Correct answer is A)

Ideally, all of the components on the income statement would be translated at the exchange rate that was in effect on the day that the transactions took place. For example, all sales that occurred on March 15, 2002, would be translated at the exchange rate that prevailed on that date. Likewise, if a large portion of inventory was purchased on October 27, 2002, then the appropriate portion of cost of goods sold would be calculated using the exchange rate from October 27, 2002. This however, is not especially practical, especially for a very large company with many transactions. The common practice is to use the average exchange rate for the accounting year, in this case 140 JPY/USD.

Q33. 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 reported dividends into U.S. dollars?

A)   145.

B)   150.

C)   140.

Correct answer is A)

Because an asset is, in effect, being transferred from the balance sheet of the subsidiary to that of the parent (in this case the asset is cash in the form of a dividend) on a known date, it is appropriate to use the exchange rate that prevails on the dividend date.

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