Lancer, Inc. (a U.S.-based company), establishes a subsidiary in a foreign country on January 1, 2016. The
Question:
Lancer, Inc. (a U.S.-based company), establishes a subsidiary in a foreign country on January 1, 2016. The following account balances for the year ending December 31, 2017, are stated in kanquo (KQ), the local currency:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . KQ 200,000
Inventory (bought on 3/1/17) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Equipment (bought on 1/1/16) . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Dividends (declared on 10/1/17) . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Notes receivable (to be collected in 2020) . . . . . . . . . . . . . . . . . 30,000
Accumulated depreciation-equipment . . . . . . . . . . . . . . . . . . . 24,000
Salary payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
The following U.S.$ per KQ exchange rates are applicable:
January 1, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . $0.13
Average for 2016 . . . . . . . . . . . . . . . . . . . . . . . . 0.14
January 1, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . 0.18
March 1, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . 0.19
October 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . 0.21
December 31, 2017. . . . . . . . . . . . . . . . . . . . . . 0.22
Average for 2017 . . . . . . . . . . . . . . . . . . . . . . . 0.20
Lancer is preparing account balances to produce consolidated financial statements.
a. Assuming that the kanquo is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?
b. Assuming that the U.S. dollar is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?
Exchange RateThe value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
Step by Step Answer:
Advanced Accounting
ISBN: 978-1259444951
13th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni