If the foreign subsidiarys functional currency is US dollar

If the foreign subsidiary\'s functional currency is US dollar, what method should be used to translate the foreign subsidiary\'s financial statements?

Question 16 options:

Book value method

Temporal method.

Fair value method

Current rate method

Question 17 (3 points)

If the foreign subsidiary\'s functional currency is foreign currency, what method should be used to translate the foreign subsidiary\'s financial statements?

Question 17 options:

Current rate method

Temporal method.

Fair value method

Book value method

	Book value method
	Temporal method.
	Fair value method
	Current rate method

ABC Inc. starts a subsidiary in a foreign country on January 1, 2004. The foreign subsidiary reports the 12/31/04 trial balance below, expressed in the foreign currency (JK) 12/31/04 Trial Balance (J Cash Accounts receivable Building (purchased 2/1/04) Accumulated depreciation Building Interest payable Note payable (issued 1/1/04) Dividends paid (paid 10/1/04) Common stock (issued 1/1/04) Rent revenue Interest expense Depreciation expense Repair expense Total Debit 49 12 170 Credit 17 12 120 6 50 72 12 17 271 271 Exchange rate (per JK) 1/1/04 2/1/04 10/1/04 12/31/04 Average for 2004 $2.28 $2.13 $2.28 $2.22 $2.16

Solution

Q16. Option B Temporal method because the local currency of subsidiary is JK while it is temporarily using $ for the purpose of financial reporting

Q17. Current Rate method as functional currency and reporting curreny are same. Option A