Lancer, Inc., starts a subsidiary in a foreign country on January 1, 2010. The following account balances for the year ending December 31, 2011, are stated in kanquo (KQ), the local currency:
Sales | KQ 200,000 |
Inventory (bought on 3/1/11) | 100,000 |
Equipment (bought on 1/1/10) | 80,000 |
Rent expense | 10,000 |
Dividends (paid on 10/1/11) | 20,000 |
Notes receivable (to be collected in 2014) | 30,000 |
Accumulated depreciation—equipment | 24,000 |
Salary payable | 5,000 |
Depreciation expense | 8,000 |
The following exchange rates for $1 are applicable:
January 1, 2010 | 3 | KQ |
January 1, 2011 | 8 |
|
March 1, 2011 | 9 |
|
October 1, 2011 | 21 |
|
December 31, 2011 | 22 |
|
Average for 2010 | 14 |
|
Average for 2011 | 20 |
|
Lancer is preparing account balances to produce consolidated financial statements.
a. 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?
b. 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?
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