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NEW QUESTION: 1
Jenna Stuart is a financial analyst for Deuce Hardware Company, a U.S. company that reports its results in
U.S. dollars. Wayward Distributing, Inc., is a foreign subsidiary of Deuce Hardware, which began operations on January 1,2007. Wayward is located in a foreign country and reports its results in the local currency called the Rho. Selected balance sheet information for Wayward is shown in the following table.
Stuart has been asked to analyze how the reported financial results of Wayward will be affected by the choice of the all-current or temporal methods of accounting for foreign operations. She has gathered the following exchange rate information on the $/Rho exchange rate:
* Spot rate on 1/01/08: $0.35 per Rho
* Spot rate on 12/31/08: $0.45 per Rho
* Average spot rate during 2008: $0.42 per Rho
Will the all-current method report a translation gain or loss for 2008, and will that gain or loss be reported on Deuce's income statement or the balance sheet?
A. Loss on the balance sheet and a gain on the income statement.
B. Gain on the income statement.
C. Gain on the balance sheet.
Answer: C
Explanation:
Explanation/Reference:
Explanation:
Exposure under the all-current method is equity. Beginning equity is positive ($4,000) and the change in equity during the year is positive ($6,000 - $4,000 = $2,000). Because the Rho appreciated during the year, the all-current method will report a translation gain for 2008. Under the all-current method gains and losses are reported as part of the cumulative translation adjustment in the equity section of the balance sheet. (Study Session 6, LOS 23.d,e)
NEW QUESTION: 2
A. Option D
B. Option C
C. Option B
D. Option A
Answer: A,C,D
NEW QUESTION: 3
A. Option D
B. Option C
C. Option B
D. Option A
Answer: A,C