32.ter Jameson, CFA® is an analyst for Continental Corp., a global investment bank. Jameson has been assigned coverage of Wasson Brothers (WB), a large U.S. based conglomerate with many subsidiaries in both the U.S. and abroad. Jameson has completed his review of the firm’s U.S. operations, but his research report is due at the end of the week and he has yet to assess the impact of Wasson’s foreign subsidiaries on his earnings model. 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 |
Kasamatsu Industries Financial Data (12/31/02) |
| Yen
(in thousands) | Exchange
Rate | U.S. Dollars
(in thousands) | Sales | 700,000 |
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| COGS | 280,000 |
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| Depreciation | 126,000 |
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| SG & A | 77,000 |
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| Income Tax Expense | 98,000 |
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| Net Income | 119,000 |
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| 2001 Retained Earnings | 0 |
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| Dividends | 58,000 |
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| 2002 Retained Earnings | 61,000 |
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| Current Assets | 50,000 |
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| Fixed Assets | 486,000 |
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| Current Liabilities | 46,000 |
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| Long Term Debt | 254,000 |
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| Capital Stock | 175,000 |
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| Accumulated Translation Adjustment |
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The first step in Jameson’s analysis is to compute Kasamatsu’s impact on WB's net income. What is Kasamatsu’s impact on WB's net income (in thousands dollars)? A) $850. B) $821. C) $793. D) $450. The correct answer was A) Because Kasamatsu is a wholly owned subsidiary of WB, all of its net income will be included in WB's. Kasamatsu’s local currency is also the functional currency, so the all-current method should be used to translate the financial statements into U.S. dollars. The appropriate exchange rate to use would be the average exchange rate for 2002, and no adjustment needs to be made for the dividend. The calculation is: 119,000/140 = 850 Therefore, WB will report an additional $850,000 of net income as a result of their subsidiary's operating results. The other answers use incorrect exchange rates. 33．son now computes the adjustment to WB's financial data due to Kasamatsu's payment of dividends. What is the U.S. dollar amount of this adjustment (in thousands)? A) $387. B) $414. C) $400. D) $580. The correct answer was C) WB receives a cash dividend from their subsidiary. This dividend must be translated at the prevailing exchange rate on the date the dividend is received, 145/$. 58,000/145 = 400 The other answers use incorrect exchange rates. 34． carrying value of Kasamatsu’s total assets on December 31, 2002, using the all-current method of accounting for translations is: A) $3,240. B) $5,360. C) $3,573. D) $3,829. The correct answer was C) Under the all-current method, all balance sheet accounts, with the exception of equity, are translated at the current rate. At the current rate of 150 under the all-current method, the amount is. (486,000 + 50,000)/150 = $3,573. 35． yen has depreciated against the dollar in the last year. If the exchange rate in 2001 was in effect during 2002, under the all-current method the reported cost of goods sold would have been: A) lower by $333. B) higher by $333. C) higher by $287. D) lower by $287. The correct answer was B) Under the all-current method, COGS is translated at the average rate in effect during the reporting period. Using the average exchange rate during 2002, COGS is calculated as 280,000/140 = $2,000. Using the average rate in effect during 2001 results in COGS of $2,333 (280,000/120), or $333 higher. 36．eson has prepared a report assessing the impact of the currency translation on Kasamatsu’s financial ratios. The details of his report are as follows: §
Quick ratio: higher §
Total asset turnover: higher With respect to the direction of changes for the ratios, Jameson is: A) incorrect with respect to the quick ratio, and incorrect with respect to the total asset turnover ratio. B) correct with respect to the quick ratio, and correct with respect to the total asset turnover ratio. C) incorrect with respect to the quick ratio, but correct with respect to the total asset turnover ratio. D) correct with respect to the quick ratio, but incorrect with respect to the total asset turnover ratio. The correct answer was C) For the quick ratio, both current assets (with the exception of inventory) and current liabilities will be translated at the current rate. The ratio will be unchanged, so Jameson is incorrect with respect to this one.
For the total asset turnover ratio, sales will be translated at the average rate, while assets will be translated at the current rate. Since the currency is depreciating, the rate used to translate sales will be higher than the rate used to translate assets, resulting in a higher total asset turnover ratio. Jameson is correct with respect to the direction of change for this one. 37．ving converted all of Kasamatsu’s accounts using the all-current methods, Jameson is curious to compare the difference between the temporal and all-current methods on balance sheet accounts. The difference in translated fixed assets and long term debt respectively if Jameson were to use the temporal method rather than the all-current method is: Fixed Assets
| Long-Term Debt
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A $1620 $0 B $1620 $121 C $0 $0 D $0 $121 The correct answer was A Fixed assets under the temporal method, are reported at historical translation rates. 486,000/100 = $4,860. Under all-current, fixed assets are translated at the current rate (486,000/150) = $3,240, a difference of $1,620. Even though it is a balance sheet account, under the temporal method, long term debt is considered a monetary liability and is translated at the current rate. Under the all-current method, long-term debt is also translated at the current rate, so the difference between the two methods is $0. | 
发表于 2008-5-12 16:50
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