Lancer, Inc., starts a subsidiary in a foreign country on January 1, 2012. The following account balances for the year ending December 31, 2013, are stated in kanquo (KQ), the local currency:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . KQ 200,000
Inventory (bought on 3/1/13) . . . . . . . . . . . . . . . 100,000
Equipment (bought on 1/1/12). . . . . . . . . . .. . . . . 80,000
Rent expense . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 10,000
Dividends (paid on 10/1/13) . . . . . . . . . . . . . . . . 20,000
Notes receivable (to be collected in 2016) . . . . . . 30,000
Accumulated depreciation-equipment . . . ... . . . 24,000
Salary payable . . . . . . . . . . . . . . . . . . . . . . . . .... . . 5,000
Depreciation expense. . . . . . . . . . . . . . . . . . . . ... . 8,000
The following exchange rates for $1 are applicable:
January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 KQ
January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
March 1, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
October 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Average for 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Average for 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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?