A subsidiary of Reynolds Inc., a U.S. company, was located in a foreign country. The local currency
Question:
A subsidiary of Reynolds Inc., a U.S. company, was located in a foreign country. The local currency of this subsidiary was the Euro (€) while the functional currency of this subsidiary was the U.S. dollar. The subsidiary acquired Equipment A on January 1, 2018, for €250,000. Depreciation expense associated with Equipment A was €25,000 per year. On January 1, 2020, the subsidiary acquired Equipment B for €150,000 and Equipment B had associated depreciation expense of €10,000. The subsidiary owned no other depreciable assets. Currency exchange rates between the U.S. dollar and the Euro were as follows:
| January 1, 2018 | € | 1 | = | $ | 1.20 |
| December 31, 2018 | € | 1 | = | $ | 1.14 |
| 2018 Average | € | 1 | = | $ | 1.18 |
| January 1, 2019 | € | 1 | = | $ | 1.15 |
| December 31, 2019 | € | 1 | = | $ | 1.21 |
| 2019 Average | € | 1 | = | $ | 1.18 |
| January 1, 2020 | € | 1 | = | $ | 1.26 |
| December 31, 2020 | € | 1 | = | $ | 1.30 |
| 2020 Average | € | 1 | = | $ | 1.28 |
What amount would have been reported for total equipment owned by the subsidiary in Reynolds’s consolidated balance sheet at December 31, 2018?
Multiple Choice
$285,000.
$456,000.
$295,000.
$300,000.
$472,000.
Expert Answer:
Advanced Accounting
ISBN: 9780132568968
11th Edition
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith
