21 which translation method should be used for the following subsidiaries a extensio 4309893

21) Which translation method should be used for the following subsidiaries?

A)

Extension of Parent Company	Autonomous
Temporal	Temporal

B)

Extension of Parent Company	Autonomous
Temporal	Current

C)

Extension of Parent Company	Autonomous
Current	Current

D)

Extension of Parent Company	Autonomous
Current	Temporal

22) For publicly-accountable companies, with foreign operations in countries with a hyper-inflationary economy, what should be done prior to translation?

A) The subsidiary's financial statements must be adjusted for changes in the price levels of the subsidiary's country.

B) The subsidiary's financial statements must be adjusted for changes in the price level of the parent's country.

C) The subsidiary's financial statements must be adjusted by the average inflation rate of the subsidiary and the parent companies' countries.

D) No adjustment is required unless the changes in price levels of the subsidiary country exceed 1000%.

:  A

Type: MC      Page Ref: 423

Difficulty:  Moderate

23) For consolidation purposes, what exchange rate is used for converting the retained earnings of a foreign subsidiary into Canadian dollars under the current rate method?

A) Specific historical rate

B) Historical rates of accumulation

C) Current rate

D) Closing rate

24) All of the following statements are stated in Brazil reals (R$)

Bralta Ltd.

Statement of Financial Position

As at June 30, 20X5

Cash	60,000		Current liabilities	500,000
Accounts receivable	740,000		Bonds payable	2,000,000
Inventories	300,000			2,500,000
Machinery (net)	850,000		Common shares	1,000,000
Land and building (net)	1,800,000		Retained earnings	250,000
	3,750,000			3,750,000

Bralta Ltd.Bralta Ltd. Statement of Comprehensive Income              Statement of Retained Earnings              For the year ended June 30, 20X5              For the year ended June 30,20X5

Sales	3,500,000		Balance, beg. of year	100,000
Cost of goods sold	1,400,000		Net income	200,000
	2,100,000			300,000
Amortization expense	350,000		Dividends declared	50,000
Bond interest expense	40,000		Balance, end of year	250,000
Other expenses	1,510,000
Net income	200,000

Additional information:

Selected exchange rates:

June 30, 20X4	R$1 = $0.5906
June 30, 20X5	R$1 = $0.5623
Average for 20X5	R$1 = $0.5744

Date of purchase of inventory on hand at year-endR$1 = $.05688

Dividends were declared on June 30, 20X5

Opening inventory = R$130,000

Inventory purchases for the year = R$1,570,000

Machinery, land, and buildings were purchased on June 30, 20X4

Bralta is the Brazilian subsidiary of Altapro Co., a Canadian company.  Bralta's had net assets at June 30, 20X4 of R$1,100,000. What is the accumulated loss adjustment under the current-rate method at 20X5?

A) $14,360

B) $14,411

C) $33,550

D) $53,215

25) Under the current-rate method, at what exchange rate is amortization expense translated?

A) At the average rate for the year

B) At the historical rate when the related assets were acquired

C) At the closing rate

D) At the rate at the beginning of the fiscal period

26) All of the following statements are stated in Brazil reals (R$)

Bralta Ltd.

Statement of Financial Position

As at June 30, 20X5

Cash	60,000		Current liabilities	500,000
Accounts receivable	740,000		Bonds payable	2,000,000
Inventories	300,000			2,500,000
Machinery (net)	850,000		Common shares	1,000,000
Land and building (net)	1,800,000		Retained earnings	250,000
	3,750,000			3,750,000

Bralta Ltd.Bralta Ltd. Statement of Comprehensive Income              Statement of Retained Earnings              For the year ended June 30, 20X5              For the year ended June 30,20X5

Sales	3,500,000		Balance, beg. of year	100,000
Cost of goods sold	1,400,000		Net income	200,000
	2,100,000			300,000
Amortization expense	350,000		Dividends declared	50,000
Bond interest expense	40,000		Balance, end of year	250,000
Other expenses	1,510,000
Net income	200,000

Additional information:

Selected exchange rates:

June 30, 20X4	R$1 = $0.5906
June 30, 20X5	R$1 = $0.5623
Average for 20X5	R$1 = $0.5744

Date of purchase of inventory on hand at year-endR$1 = $.05688

Dividends were declared on June 30, 20X5

Opening inventory = R$130,000

Inventory purchases for the year = R$1,570,000

Machinery, land, and buildings were purchased on June 30, 20X4

Bralta is the Brazilian subsidiary of Altapro Co., a Canadian company.  What is the balance of total assets under the temporal method?

A) $2,108,625

B) $2,154,000

C) $2,183,620

D) $2,185,570

27) All of the following statements are stated in Brazil reals (R$)

Bralta Ltd.

Statement of Financial Position

As at June 30, 20X5

Cash	60,000		Current liabilities	500,000
Accounts receivable	740,000		Bonds payable	2,000,000
Inventories	300,000			2,500,000
Machinery (net)	850,000		Common shares	1,000,000
Land and building (net)	1,800,000		Retained earnings	250,000
	3,750,000			3,750,000

Bralta Ltd.Bralta Ltd. Statement of Comprehensive Income              Statement of Retained Earnings              For the year ended June 30, 20X5              For the year ended June 30,20X5

Sales	3,500,000		Balance, beg. of year	100,000
Cost of goods sold	1,400,000		Net income	200,000
	2,100,000			300,000
Amortization expense	350,000		Dividends declared	50,000
Bond interest expense	40,000		Balance, end of year	250,000
Other expenses	1,510,000
Net income	200,000

Additional information:

Selected exchange rates:

June 30, 20X4	R$1 = $0.5906
June 30, 20X5	R$1 = $0.5623
Average for 20X5	R$1 = $0.5744

Date of purchase of inventory on hand at year-endR$1 = $.05688

Dividends were declared on June 30, 20X5

Opening inventory = R$130,000

Inventory purchases for the year = R$1,570,000

Machinery, land, and buildings were purchased on June 30, 20X4

Bralta is the Brazilian subsidiary of Altapro Co., a Canadian company.  Bralta's net monetary position at June 30, 20X4 was R$2,030,000. What is the accumulated translation gain (loss) under the temporal method?

A) $(33,550)

B) $ 22,140

C) $ 52,851

D) $ 52,855

28) Under the temporal method, at what exchange rate is amortization expense translated?

A) At the average rate for the year

B) At the historical rate when the related assets were acquired

C) At the closing rate

D) At the rate at the beginning of the fiscal period

29) Under the temporal method, how is an exchange gain arising from the long-term debt of a foreign subsidiary, accounted for?

A) Deferred until the date of maturity

B) Recognized as a component of current income

C) As part of the cumulative translation adjustment

D) Deferred and amortized over the period to maturity

:  B

Type: MC      Page Ref: 431

Difficulty:  Moderate

30) Under the temporal method, what is the accounting treatment for exchange gains and losses arising from previous years?

A) Reported as equity

B) Reported in other comprehensive income

C) Reported in consolidated net income

D) Included in opening consolidated retained earnings

31) Under the current-rate method, what is the accounting treatment for exchange gains and losses arising from previous years?

A) Reported as equity

B) Reported in other comprehensive income

C) Reported in consolidated net income

D) Included in opening consolidated retained earnings

32) If a foreign currency is strengthening with respect to the Canadian dollar, which of the following is true?

A) Both the current-rate method and the temporal method would show an exchange gain.

B) Both the current-rate method and the temporal method would show an exchange loss.

C) The current-rate method would show an exchange gain and the temporal method would show an exchange loss.

D) The current-rate method would show an exchange loss and the temporal method would show an exchange gain.

33) For private enterprises that use the current-rate method, how does reporting under Accounting Standards for Private Enterprises (ASPE) differ from reporting under IFRS?

A) Exchange gains and losses are reported as other comprehensive income.

B) Exchange gains and losses are reported as net income.

C) Exchange gains and losses are reported as a separate component of shareholders' equity.

D) The current-rate method is not permitted under ASPE.