XYZ Corporation, a U.S. parent firm, has a wholly owned sales affiliate, ABC Ltd., in the United Kingdom. The affiliate was established to service the local market.

Assume that

1. the functional currency of ABC is the pound.
2. the reporting currency is the dollar.
3. the initial exchange rate $1.00 = £0.67.

ABC's nonconsolidated balance sheets and the footnotes to the financial statements indicate that ABC owes the parent firm £200,000. Assume that, XYZ had made an investment of $500,000 in the affiliate. Under FASB 52, the intercompany debt and investment will appear on the consolidated balance sheet as

Multiple Choice

• £200,000.

• $201,493.

• $298,507.

• none of the options

Answer rating: 100% (QA)

Solution Parent co XYZ Subsidairy co Transactional currency Euro Functional currency Pound re... View the full answer