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Basic Question 4 of 6
The German subsidiary of the U.S. firm Max. Co. has the following balance sheet information for its first year of operation (German Marks):
Inventory: 450.
Fixed assets (net): 780.
Total: 1,330.
Accounts payable: 120.
Common stock: 1,000.
Retained earnings: 90.
Total: 1,330.
B. $128.57.
C. $150.00.
Cash: 100.
Inventory: 450.
Fixed assets (net): 780.
Total: 1,330.
Accounts payable: 120.
Common stock: 1,000.
Retained earnings: 90.
Total: 1,330.
The U.S. controller will use the all-current method for foreign currency translation, where the translation rate at the beginning of the year was 3.0 marks to the dollar, the average rate 3.5 marks to the dollar, and the year-end rate at 4 marks to the dollar.
Using the all-current method, inventory would be translated (to the nearest penny) at:
A. $112.50.
B. $128.57.
C. $150.00.
User Contributed Comments 3
| User | Comment |
|---|---|
| danlan2 | Use 4 marks for inventory. |
| ljamieson | how about use ending fx rate for inventory |
| Querdenker | Nice how AN predicts the breakdown of the Euro plus significant devaluation of the German Currency... |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
compare the current rate method and the temporal method, evaluate how each affects the parent company's balance sheet and income statement, and determine which method is appropriate in various scenarios;
calculate the translation effects and evaluate the translation of a subsidiary's balance sheet and income statement into the parent company's presentation currency;
CFA® 2025 Level II Curriculum, Volume 2, Module 12.