Question

In: Accounting

Selected balance sheet accounts of a foreign subsidiary of the Pacter Company have been translated into...

  1. Selected balance sheet accounts of a foreign subsidiary of the Pacter Company have been translated into parent currency (F) as follows:

Translated at

Current Rates

Historical Rates

Accounts receivable

F 100,000

F 120,000

Marketable securities, at cost

200,00

240,000

Prepaid insurance

120,0000

130,000

Goodwill

250,000

300,000

F 670,000

F 790,000

a. Assuming that the foreign subsidiary is determined to have the foreign currency as its functional currency in accordance with IAS 21, determine the total amount that should be included in Pacter’s consolidated balance sheet for the assets listed in accordance with International Financial Reporting Standards (IFRS)

b. Assuming that the foreign subsidiary is determined to have Pacter’s reporting currency as its functional currency in accordance with IAS 21, determine the total amount that should be included in Pacter’s consolidated balance sheet for the assets listed in accordance with IFRS.

Solutions

Expert Solution

IAS 21 deals with effects of changes in Foreign exchange rates and outlines how to account for foreign currency transactions and operations in financial statements. It devises current rate and temporal method for foreign translation.

In current rate method, most of items in financial statements are translated at current exchange rates. This method is appropriate when the subsidiary is not fully integrated with parent company and the local currency is the functional currency for the subsidiary.

While under temporal method, the exchange rates are based on historical rates. Temporal method is also popularly called historical method. This method is appropriate when the subsidiary does not use the local currency as the functional currency. Hence, parents have to convert using the historical rates.

However, under temporal method, the monetary assets such as accounts receivables and investments are converted at exchange rate applicable at balance sheet date. For the solution, accounts receivable conversion will be made under current rate for temporal method.

Requirement a

Current Rate method

Accounts Receivable

F 100,000

Marketable securities at cost

200,000

Prepaid insurance

120,000

Goodwill

250,000

Total amount of assets

F 670,000

Hence, total amount of asset to be reported under Pacter's consolidated balance sheet would be F 670,000.

Requirement b

Temporal Method

Accounts Receivable

F 100,000

Marketable securities at cost

240,000

Prepaid insurance

130,000

Goodwill

300,000

Total amount of assets

F 770,000

Hence, total amount of asset to be reported under Pacter's consolidated balance sheet would be F 770,000.

kindly upvote


Related Solutions

The U.S. MNC has translated the balance sheet and income statement of a French subsidiary, which...
The U.S. MNC has translated the balance sheet and income statement of a French subsidiary, which keeps its books in euro, then is translated into U.S. dollars using the current/noncurrent method—the reporting currency of the U.S. MNC. The subsidiary is at the end of its first year of operation. The historical exchange rate is $1.60/€1.00 and the most recent exchange rate is $1.50/€. The foreign currency gain or loss for this U.S. MNC is Local Currency Current/Non current Balance Sheet...
A consolidated income statement and selected comparative consolidated balance sheet data for Palano Company and subsidiary...
A consolidated income statement and selected comparative consolidated balance sheet data for Palano Company and subsidiary follow: Palano Company and Subsidiary Consolidated Income Statement for the Year Ended December 31, 2015 Sales $701,000 Cost of sales 263,000 Gross profit 438,000 Operating expenses:    Depreciation expense $76,000    Selling expenses 122,000    Administrative expenses 85,000 283,000 Consolidated net income 155,000 Less noncontrolling interest in consolidated net income 38,750 Controlling interest in consolidated net income $116,250 December 31 2014 2015 Accounts receivable $229,000 $318,000 Inventory...
Selected balance sheet accounts for Tibbetts Company on September 30, 2016, are as follows: Cash $...
Selected balance sheet accounts for Tibbetts Company on September 30, 2016, are as follows: Cash $ 44,800 Marketable securities 126,000 Accounts receivable, net 154,000 Inventory 175,000 Prepaid expenses 19,600 Total current assets $ 519,400 Accounts payable $ 99,000 Other accrued liabilities 24,200 Short-term debt 44,000 Total current liabilities $ 167,200 a. Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2016. (Round "Ratio" answers to 2 decimal places.) b. Summarized here are the...
Selected balance sheet accounts for Tibbetts Company on September 30, 2019, are as follows: Cash $...
Selected balance sheet accounts for Tibbetts Company on September 30, 2019, are as follows: Cash $ 41,600 Marketable securities 117,000 Accounts receivable, net 143,000 Inventory 162,500 Prepaid expenses 18,200 Total current assets $ 482,300 Accounts payable $ 81,000 Other accrued liabilities 19,800 Short-term debt 36,000 Total current liabilities $ 136,800 Required: Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2019. Summarized here are the transactions/events that took place during the fiscal year...
Selected balance sheet accounts for Tibbetts Company on September 30, 2016, are as follows: Cash $...
Selected balance sheet accounts for Tibbetts Company on September 30, 2016, are as follows: Cash $ 44,800 Marketable securities 126,000 Accounts receivable, net 154,000 Inventory 175,000 Prepaid expenses 19,600 Total current assets $ 519,400 Accounts payable $ 108,000 Other accrued liabilities 26,400 Short-term debt 48,000 Total current liabilities $ 182,400 Required: a. Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2016. (Round "Ratio" answers to 2 decimal places.) b. Summarized here are...
Selected balance sheet accounts for Tibbetts Company on September 30, 2019, are as follows: Cash $...
Selected balance sheet accounts for Tibbetts Company on September 30, 2019, are as follows: Cash $ 32,000 Marketable securities 90,000 Accounts receivable, net 110,000 Inventory 125,000 Prepaid expenses 14,000 Total current assets $ 371,000 Accounts payable $ 90,000 Other accrued liabilities 22,000 Short-term debt 40,000 Total current liabilities $ 152,000 Required: Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2019. Summarized here are the transactions/events that took place during the fiscal year...
Comparative balance sheet accounts of Splish Company are presented below. SPLISH COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS...
Comparative balance sheet accounts of Splish Company are presented below. SPLISH COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 Debit Balances 2020 2019 Cash $70,600 $50,500 Accounts Receivable 155,100 130,000 Inventory 75,600 61,100 Debt investments (available-for-sale) 55,100 84,300 Equipment 70,300 48,400 Buildings 144,400 144,400 Land 39,600 25,300      Totals $610,700 $544,000 Credit Balances Allowance for Doubtful Accounts $10,000 $7,900 Accumulated Depreciation—Equipment 21,000 14,100 Accumulated Depreciation—Buildings 37,300 28,200 Accounts Payable 66,400 60,600 Income Taxes Payable 11,900 9,900 Long-Term Notes Payable 62,000...
Comparative balance sheet accounts of Carla Company are presented below. CARLA COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS...
Comparative balance sheet accounts of Carla Company are presented below. CARLA COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 Debit Balances 2020 2019 Cash $69,900 $50,600 Accounts Receivable 154,800 130,300 Inventory 75,700 61,400 Debt investments (available-for-sale) 55,100 84,600 Equipment 69,300 48,400 Buildings 145,700 145,700 Land 40,200 25,200      Totals $610,700 $546,200 Credit Balances Allowance for Doubtful Accounts $10,100 $7,900 Accumulated Depreciation—Equipment 21,000 14,000 Accumulated Depreciation—Buildings 36,800 28,100 Accounts Payable 65,600 59,500 Income Taxes Payable 12,000 10,100 Long-Term Notes Payable 62,000...
Comparative balance sheet accounts of Sweet Company are presented below. SWEET COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS...
Comparative balance sheet accounts of Sweet Company are presented below. SWEET COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 Debit Balances 2020 2019 Cash $69,600 $51,100 Accounts Receivable 156,500 130,000 Inventory 75,700 60,800 Debt investments (available-for-sale) 55,000 85,300 Equipment 69,600 47,800 Buildings 144,900 144,900 Land 39,600 25,200      Totals $610,900 $545,100 Credit Balances Allowance for Doubtful Accounts $10,000 $8,000 Accumulated Depreciation—Equipment 20,800 14,100 Accumulated Depreciation—Buildings 37,000 27,900 Accounts Payable 66,500 59,800 Income Taxes Payable 11,900 10,000 Long-Term Notes Payable 62,000...
Comparative balance sheet accounts of Pina Company are presented below. PINA COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS...
Comparative balance sheet accounts of Pina Company are presented below. PINA COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 Debit Balances 2017 2016 Cash $69,500 $50,900 Accounts Receivable 153,400 131,000 Inventory 75,300 60,900 Debt investments (available-for-sale) 54,800 85,600 Equipment 70,300 48,300 Buildings 143,900 143,900 Land 40,000 24,900 Totals $607,200 $545,500 Credit Balances Allowance for Doubtful Accounts $10,100 $7,900 Accumulated Depreciation—Equipment 20,800 14,000 Accumulated Depreciation—Buildings 36,900 27,700 Accounts Payable 66,500 59,600 Income Taxes Payable 11,900 10,100 Long-Term Notes Payable 62,000...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT