Question

Bentley Company owns a subsidiary in India whose balance sheets in rupees (R) for the last two years follow:



Bentley formed the subsidiary on January 1, 20X6, when the exchange rate was 30 rupees for 1 U.S. dollar. The exchange rate for 1 U.S. dollar on December 31, 20X6, and December 31, 2007, had increased to 35 rupees and 40 rupees, respectively. Income is earned evenly over the year, and the subsidiary declared no dividends during its first two years of existence.

Required
a. Present both the direct and the indirect exchange rate for the rupees for the three dates of (1) January 1, 20X6, (2) December 31, 20X6, and (3) December 31, 20X7. Did the dollar strengthen or weaken in 20X6 and in 20X7?
b. Prepare the subsidiary’s translated balance sheet as of December 31, 20X6, assuming the rupee is the subsidiary’s functional currency.
c. Prepare the subsidiary’s translated balance sheet as of December 31, 20X7, assuming the rupee is the subsidiary’s functional currency.
d. Compute the amount that 20X7’s other comprehensive income would include as a result of thetranslation.


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  • CreatedMay 23, 2014
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