74.uth
Seas Inc, a subsidiary of Seven Seas Inc., reported its most recent performance in its local currency (LC) which is the functional currency. The reporting currency of Seven Seas is the U.S. dollar (USD). The current exchange rate is 2LC/USD, the historic exchange rate is 2.5LC/USD, and the average exchange over the past year is 2.2LC/USD. South Seas also paid a dividend of 16,000LC at year end, at which time the exchange rate was 2LC/USD.
| LC | Revenues | 520,000 | COGS | 225,000 | SG&A | 100,000 | Depreciation | 80,000 | Income Taxes | 46,000 | Net Income | 69,000 |
What is the amount of income Seven Seas should report from its South Seas subsidiary? A) 34,500 USD. B) 27,600 USD. C) 19,636 USD. D) 31,364 USD. The correct answer was D)
| LC | Conversion | USD |
| Revenues | 520,000 | /2.2 | 236,364 | average rate | COGS | 225,000 | /2.2 | 102,273 | average rate | SG&A | 100,000 | /2.2 | 45,455 | average rate | Depreciation | 80,000 | /2.2 | 36,364 | average rate | Income Taxes | 46,000 | /2.2 | 20,909 | average rate | Net Income | 69,000 |
| 31,364 |
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75.t year Seven Seas reported balance sheet retained earnings of 90,000 USD for its South Seas subsidiary. How much retained earnings will Seven Seas report for its South Seas subsidiary on the balance sheet? A) 121,364 USD. B) 113,364 USD. C) 8,000 USD. D) 23,364 USD. The correct answer was B) Dividends are translated at the rate 2LC/USD. Therefore, the 16,000 LC dividend is equivalent to 16,000LC/2 = 8,000 USD. Net income less dividends equals the current period retained earnings of 23,364 USD (31,364 USD – 8,000 USD). The balance sheet retained earnings is the sum of last year’s and the current period’s retained earnings or 113,364 USD (90,000 + 23,364). |
发表于 2008-5-13 11:54
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