Q44. The Precision Screen Printers (PSP) Company has a foreign subsidiary, the Acer Tool & Die Company, located in the country
of Rolivia. The currency of Rolivia is the
year-ended December 31, 2002, is shown below. The balance sheet has been restated using the U.S. dollar as the functional
currency.
Acer Tool & Die Company Balance Sheet As of December 31, 2002 | |||||||
| (millions) | Exchange Rate (Chad/US$) | (millions) | ||||
Cash | 20 | | 0.25 | | $80 | | |
Accounts receivable | 30 | 0.25 | 120 | ||||
Inventory | 100 | 0.3125 | 320 | ||||
Fixed assets (net) | 500 | 0.3333 | 1,500 | ||||
Total assets | 650 | | $2,020 | ||||
| |||||||
Accounts payable | 50 | | 0.25 | | $200 | | |
Capital stock | 380 | 0.3333 | 1,140 | ||||
Retained earnings | 220 | -- | 680 | ||||
Total liabilities and equity | 650 | | $2,020 | ||||
Acer Tool & Die Company Income Statement For year ending December 31, 2002 (Amounts in millions of | |||||||
Revenues | 1,000 | ||||||
Cost of sales | 700 | ||||||
Depreciation expense | 50 | ||||||
Selling expense | 30 | ||||||
Net income | 220 | ||||||
The exchange rate at the beginning of 2002 was 0.3333 Chad/US$. The exchange rate at the end of 2002 was 0.25 Chad/US$. The average rate for 2002 is 0.3125 Chad/US$. Beginning inventory is 90
Using the current rate method for the Acer Tool & Die Company, what is the value of total assets after translation?
A) $2,600.
B) $2,020.
C) $1,950.
答案和详解如下：
Q44. The Precision Screen Printers (PSP) Company has a foreign subsidiary, the Acer Tool & Die Company, located in the country
of Rolivia. The currency of Rolivia is the
year-ended December 31, 2002, is shown below. The balance sheet has been restated using the U.S. dollar as the functional
currency.
Acer Tool & Die Company Balance Sheet As of December 31, 2002 | |||||||
| (millions) | Exchange Rate (Chad/US$) | (millions) | ||||
Cash | 20 | | 0.25 | | $80 | | |
Accounts receivable | 30 | 0.25 | 120 | ||||
Inventory | 100 | 0.3125 | 320 | ||||
Fixed assets (net) | 500 | 0.3333 | 1,500 | ||||
Total assets | 650 | | $2,020 | ||||
| |||||||
Accounts payable | 50 | | 0.25 | | $200 | | |
Capital stock | 380 | 0.3333 | 1,140 | ||||
Retained earnings | 220 | -- | 680 | ||||
Total liabilities and equity | 650 | | $2,020 | ||||
Acer Tool & Die Company Income Statement For year ending December 31, 2002 (Amounts in millions of | |||||||
Revenues | 1,000 | ||||||
Cost of sales | 700 | ||||||
Depreciation expense | 50 | ||||||
Selling expense | 30 | ||||||
Net income | 220 | ||||||
The exchange rate at the beginning of 2002 was 0.3333 Chad/US$. The exchange rate at the end of 2002 was 0.25 Chad/US$. The average rate for 2002 is 0.3125 Chad/US$. Beginning inventory is 90
Using the current rate method for the Acer Tool & Die Company, what is the value of total assets after translation?
A) $2,600.
B) $2,020.
C) $1,950.
Correct answer is A)
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.
With the current rate method, all balance sheet items except for common stock are translated at the current rate. Total assets = 650 / 0.25 = $2,600.
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