Q18. Dell Air Lines has recently acquired Australian Puddle Jumpers, Inc. (APJ), a small airline located in
dollar has been chosen by Dell as the functional currency for APJ. The Balance Sheet of APJ is given below as of Dec. 31,
2001 in U.S. dollars.
Assets | | Liabilities and Equity | ||
Cash | $100 | | Accounts Payable (A/P) | $90 |
Accounts Receivable (A/R) | 120 | | Common Stock | 360 |
Maintenance Supplies | 90 | | | |
Fixed Assets | 140 | | | |
Total Assets | $450 | | Total Liabilities & Equity | $450 |
APJ's income statement for the year ending Dec. 31, 2002 is expressed in Australian dollars as:
Sales | 3,500 |
Total Costs | 2,900 |
Net Income | 600 |
The Australian dollar has steadily depreciated against the U.S. dollar. At Dec. 31, 2001, the exchange rate was 2.5 Australian dollars = $1 but at Dec. 31, 2002, the exchange rate had deteriorated to 3 Australian dollars = $1.
The Dec. 31, 2002 Balance Sheet for APJ is given in Australian dollars as follows:
Assets | | Liabilities and Equity | ||
Cash | 441 | | A/P | 210 |
A/R | 330 | | Common Stock | 720 |
Supplies | 291 | | Retained Earnings | 600 |
Fixed Assets | 468 | | | |
| | | | |
Total Assets | 1,530 | | Total Liabilities & Equity | 1,530 |
On APJ's 2002 income statement, the level of sales in U.S. dollars would be:</FONT
A) $1,985.</FONT< TD>
B) $1,272.</FONT< TD>
C) $1,167.</FONT< TD>
Q19. On APJ's 2002 income statement, the level of net income in U.S. dollars would be:
A) $242.
B) $217.
C) $200.
答案和详解如下：
Q18. Dell Air Lines has recently acquired Australian Puddle Jumpers, Inc. (APJ), a small airline located in
dollar has been chosen by Dell as the functional currency for APJ. The Balance Sheet of APJ is given below as of Dec. 31,
2001 in U.S. dollars.
Assets | | Liabilities and Equity | ||
Cash | $100 | | Accounts Payable (A/P) | $90 |
Accounts Receivable (A/R) | 120 | | Common Stock | 360 |
Maintenance Supplies | 90 | | | |
Fixed Assets | 140 | | | |
Total Assets | $450 | | Total Liabilities & Equity | $450 |
APJ's income statement for the year ending Dec. 31, 2002 is expressed in Australian dollars as:
Sales | 3,500 |
Total Costs | 2,900 |
Net Income | 600 |
The Australian dollar has steadily depreciated against the U.S. dollar. At Dec. 31, 2001, the exchange rate was 2.5 Australian dollars = $1 but at Dec. 31, 2002, the exchange rate had deteriorated to 3 Australian dollars = $1.
The Dec. 31, 2002 Balance Sheet for APJ is given in Australian dollars as follows:
Assets | | Liabilities and Equity | ||
Cash | 441 | | A/P | 210 |
A/R | 330 | | Common Stock | 720 |
Supplies | 291 | | Retained Earnings | 600 |
Fixed Assets | 468 | | | |
| | | | |
Total Assets | 1,530 | | Total Liabilities & Equity | 1,530 |
On APJ's 2002 income statement, the level of sales in U.S. dollars would be:</FONT
A) $1,985.</FONT< TD>
B) $1,272.</FONT< TD>
C) $1,167.</FONT< TD>
Correct answer is B)
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.
Since the Australian dollar is the functional currency, use the current rate method. The items in the income statement are translated at the average exchange rate under FASB 52. The average rate is (2.5 + 3) / 2 = 2.75 Australian dollars = $1.
Income Statement (in $)
Sales (3,500 / 2.75) | $1,272 |
Costs (2,900 / 2.75) | $1,055 |
Net Income | $217 |
Q19. On APJ's 2002 income statement, the level of net income in U.S. dollars would be:
A) $242.
B) $217.
C) $200.
Correct answer is B)
Since the Australian dollar is the functional currency, use the current rate method. The items in the income statement are translated at the average exchange rate under FASB 52. The average rate is (2.5 + 3) / 2 = 2.75 Australian dollars = $1.
Income Statement (in $)
Sales (3,500 / 2.75) | $1,272 |
Costs (2,900 / 2.75) | $1,055 |
Net Income | $217 |
thx
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