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 beginning U.S. dollar value of Giant's retained earnings was $2,600,000.
§
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.
|
发表于 2009-1-17 15:29
| 
