Question

Lancer, Inc. (a U.S.-based company), establishes a subsidiary in a foreign country on January 1, 2016....

Lancer, 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 190,000
Inventory (bought on 3/1/17) 95,000
Equipment (bought on 1/1/16) 58,000
Rent expense 12,000
Dividends (declared on 10/1/17) 22,000
Notes receivable (to be collected in 2020) 35,000
Accumulated depreciation—equipment 17,400
Salary payable 4,800
Depreciation expense 5,800

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

January 1, 2016 $0.18
Average for 2016 0.19
January 1, 2017 0.23
March 1, 2017 0.24
October 1, 2017 0.26
December 31, 2017 0.27
Average for 2017 0.25

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.)

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Answer #1


Lancer, Inc. (a) Current Rate Method (b) Temporal Method Account Translation Remeasurement Sales 0.25 A 0.25 A Inventory 0.27

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