Question

Ace Corporation starts a subsidiary in a foreign country; the subsidiary has the peso as its functional currency. On January 1, Ace buys all of the subsidiary’s common stock for 20,000 pesos. On April 1, the subsidiary purchases inventory for 20,000 pesos with payment made on May 1, and sells this inventory on August 1 for 30,000 pesos, which it collects on October 1. Currency exchange rates for 1 peso are as follows:
January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.15 = 1 peso
April 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.17 = 1
May 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.18 = 1
August 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.19 = 1
October 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.20 = 1
December 31 . . . . . . . . . . . . . . . . . . . . . . . . 0.21 = 1
In preparing consolidated financial statements, what translation adjustment will Ace report at the
end of the current year?
a. $400 positive (credit).
b. $600 positive (credit).
c. $1,400 positive (credit).
d. $1,800 positive (credit).



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  • CreatedOctober 04, 2014
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