Question

ancer, Inc. (a U.S.-based company), establishes a subsidiary in a foreign country on January 1, 2016. The following account balances for the year ending December 31, 2017, are stated in kanquo (KQ), the local currency:

Sales	KQ	170,000
Inventory (bought on 3/1/17)		85,000
Equipment (bought on 1/1/16)		54,000
Rent expense		12,000
Dividends (declared on 10/1/17)		20,000
Notes receivable (to be collected in 2020)		33,000
Accumulated depreciation—equipment		16,200
Salary payable		4,400
Depreciation expense		5,400

The following U.S.$ per KQ exchange rates are applicable:

January 1, 2016	$0.16
Average for 2016	0.17
January 1, 2017	0.21
March 1, 2017	0.22
October 1, 2017	0.24
December 31, 2017	0.25
Average for 2017	0.23

Lancer is preparing account balances to produce consolidated financial statements.

1. Assuming that the kanquo is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?

2. Assuming that the U.S. dollar is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?

(Round your answers to 2 decimal places.)

Rate of Exchange and reporting amount of each account

Particulars	Rate on Date	Rate of Exchange ($ per KQ)	Amount in KQ	Amount in $
Sales	Date of sale / Average Rate
Inventory	Date of Purchase / Average Rate
Equipment	Closing Rate
Rent Expense	Average Rate
Dividends	On date of declaration
Note Receivable	Closing Rate
Accumulated Depreciation	Closing Rate
Depreciation Expense	Average Rate

Answer 1

Particulars	Rate on Date	Rate of Exchange	Amount in KQ	Amount in $
		($ per KQ)
Sales	Average Rate	$ 0.23	170,000	$ 39,100.00
Inventory	Date of Purchase / Average Rate	$ 0.25	85,000	$ 21,250.00
Equipment	Closing Rate	$ 0.25	54,000	$ 13,500.00
Rent Expense	Average Rate	$ 0.23	12,000	$   2,760.00
Dividends	On date of declaration	$ 0.24	20,000	$   4,800.00
Note Receivable	Closing Rate	$ 0.25	33,000	$   8,250.00
Accumulated Depreciation	Closing Rate	$ 0.25	16,200	$   4,050.00
Salary payable	Closing Rate	$ 0.25	4,400	$   1,100.00
Depreciation Expense	Average Rate	$ 0.23	5,400	$   1,242.00