The translated balance of "Plant and equipment" is $55,000. Does this represent the current cost of the asset in the U.S.? In South Africa? Explain.

Hint: Neither. Carefully explain why.

South African rand is functional currency (Current rate method)

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Retained earnings, 1/1/Y₁ (using HC for equity accounts) Net income, Year 1 Dividends, 6/1/Y1 Dividends, 12/1/Y₁1 Retained earnings, 12/31/Y1 Cash (using Current rate for assets and liabilities) Receivables Inventory Plant and equipment Less: accumulated depreciation Total assets 110,000 (20,000) (20,000) 70,000 80,000 150,000 270,000 500,000 (50,000) 950,000 0.095 0.105 0.110 0.110 0.110 0.110 0.110 10,560 (1,900) (2,100) 6,560 8,800 16,500 29,700 55,000 (5,500) 104,500 Retained earnings, 1/1/Y₁ (using HC for equity accounts) Net income, Year 1 Dividends, 6/1/Y1 Dividends, 12/1/Y₁1 Retained earnings, 12/31/Y1 Cash (using Current rate for assets and liabilities) Receivables Inventory Plant and equipment Less: accumulated depreciation Total assets 110,000 (20,000) (20,000) 70,000 80,000 150,000 270,000 500,000 (50,000) 950,000 0.095 0.105 0.110 0.110 0.110 0.110 0.110 10,560 (1,900) (2,100) 6,560 8,800 16,500 29,700 55,000 (5,500) 104,500

Answer rating: 100% (QA)

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