Reference no: EM131119157
Stebbins Corporation established a wholly owned Canadian subsidiary on January 1, Year 1, by contributing US$500,000 for all of the subsidiary's common stock. The exchange rate on that date was C$1:US$.90 (that is, one Canadian dollar equaled 90 U.S. cents). The Canadian subsidiary invested C$500,000 in a building with an expected life of 20 years and rented it to various tenants for the year. The average exchange rate during Year 1 was C$1:US$.85, and the exchange rate on December 31, Year 1, was C$1:US$.80. Exhibit 7.38 shows the amounts taken from the books of the Canadian subsidiary at the end of Year 1, measured in Canadian dollars.
Required
a. Prepare a balance sheet, an income statement, and a retained earnings statement for the Canadian subsidiary for Year 1 in U.S. dollars assuming that the Canadian dollar is the functional currency. Include a separate schedule showing the computation of the translation adjustment account.
b. Repeat Part a assuming that the U.S. dollar is the functional currency. Include a separate schedule showing the computation of the translation gain or loss.
c. Why is the sign of the translation adjustment for Year 1 under the all-current translation method and the translation gain or loss for Year 1 under the monetary/nonmonetary translation method the same? Why do their amounts differ?
d. Assuming that the firm could justify either translation method, which method would management of Stebbins Corporation likely prefer for Year 1? Why?
Correction of a mathematical error in inventory pricing
: A change in the method of accounting for leases for tax purposes to conform with the financial accounting method. As a result, both deferred and current taxes payable changed substantially.
|
Prepare a balance sheet and income statement
: Prepare a balance sheet, an income statement, and a retained earnings statement for the Canadian subsidiary for Year 2 in U.S. dollars, assuming that the Canadian dollar is the functional currency.
|
True of leadership styles across cultures
: Which of the following is true of leadership styles across cultures?
|
What would be the proper adjustment to the december
: What would be the proper adjustment to the December 31, 2009, retained earnings?
|
Prepare a balance sheet an income statement
: Prepare a balance sheet, an income statement, and a retained earnings statement for the Canadian subsidiary for Year 1 in U.S. dollars assuming that the Canadian dollar is the functional currency. Include a separate schedule showing the computation o..
|
Change from fair value to equity method on january
: On the books of Martin Company prepare all journal entries in 2009, 2010, and 2011 that relate to its investment in Renner Corp., reflecting the data above and a change from the fair value method to the equity method.
|
Prepare a schedule showing the income or loss
: Prepare a schedule showing the income or loss before income taxes for the year ended December 31, 2010, that Millay should report from its investment in Genso in its income statement issued in March 2011.
|
True of transformational leadership
: Which of the following is true of transformational leadership?
|
Indicate whether the amount is a gain or loss
: Assume that the currency of Foreign Sub is the functional currency. Compute the change in the cumulative translation adjustment for 2010. Indicate whether the change increases or decreases shareholders' equity. Assume that the U.S. dollar is the func..
|