Details of this Paper

International Company will translate (convert) the...

Description

Solution


Question

International Company will translate (convert) the Korean subsidiary?s financial statements into dollars before preparing the consolidation. To do so they go thru a process where the Korean subsidiary?s financial statements are remeasured into the Korean subsidiary?s functional currency and then translated into dollars (the Parent Company?s reporting currency). Since the Korean subsidiary does most of its business in Yen (Japan) the functional currency is the Japanese Yen. In this problem the Korean subsidiary?s books are kept in South Korean Won. These amounts must be remeasured into the functional currency ? the Japanese Yen. This process uses the temporal method of translation. The temporal method calls for: ? Cash and accounts receivable are translated at the current rate. ? Inventory is translated at its historic cost. ? Cost of goods sold is translated at the historic cost of the inventory. ? Depreciation expense is translated at the historic cost of the building. ? Equity is translated at its historic rate The remeasurement process results in a foreign currency gain or loss that is applied to net income in the translation gain/loss. Once the Korean Won are remeasured into Japanese Yen they then must be translated ifrom the Japanese Yen into the reporting currency ? American Dollars. This conversion uses the current rate of to translate from the functional currency to the reporting currency. This results in a foreign currency adjustment. This adjustment gain or loss from translation is called a translation adjustment and is shown as other comprehensive income. Other comprehensive may be shown as a separate section of the income statement, a separate comprehensive income statement or part of retained earnings. The current rate method calls for: ? Assets and liabilities are translated at the current exchange rate; equity is translated at historical rates. ? Revenues and expenses which occur evenly throughout the period are translated at the average-for-the-period exchange rate. Income items, such as gains and losses, which are the result of a discrete event, are translated at the actual exchange rate on the date of occurrence. Attached Template for Question

 

Paper#7635 | Written in 18-Jul-2015

Price : $25
SiteLock