Brief
Essay Questions
82. In
translating a foreign subsidiary’s financial statements, what exchange rate
should be used for the subsidiary’s revenues and expenses?
83. How
can a parent corporation determine the functional currency for a foreign
subsidiary that conducts business in more than one country?
84. What
exchange rate should be used to translate (a) revenues and expenses that occur
throughout the year and (b) a gain or loss that occurs on a specific day?
85. Perkle
Co. owned a subsidiary in Belgium; the subsidiary’s functional currency
was the Belgian franc. During 2004,
Perkle engaged in hedging transactions to offset part of the subsidiary’s net
asset position. How should the effects
of exchange rate fluctuations on the currency hedge be accounted for?
86. Under
what circumstances would the translation of a foreign subsidiary’s financial
statements not be required?
87. A
foreign subsidiary of a U.S. corporation purchased equipment on January 4,
2002.
A. How would depreciation
expense on the equipment be translated for 2004?
B. How would depreciation
expense on the equipment be remeasured for 2004?
88. What
exchange rate would be used to translate the asset and liability account
balances of a foreign subsidiary? What
justification can be given for using this exchange rate?
89. Farley
Brothers, a U.S. company, had a subsidiary in Italy. Under what conditions would the U.S. dollar
be the functional currency for this subsidiary?
90. What
is the justification for the remeasurement of foreign currency
transactions?
91. Contrast
the purpose of remeasurement with the purpose of translation.
