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question ace corporation starts a foreign subsidiary on january 1 byinvesting 20 000 4287707

Question

Ace Corporation starts a foreign subsidiary on January 1 byinvesting 20,000 pulas. Ace owns all of the shares of thesubsidiary’s common stock. The foreign subsidiary generates10,000 pulas of net income throughout the year and pays nodividends. The pula is the foreign company’s functional currency.Currency exchange rates for 1 pula are as follows:

January 1 . . . . . . . . . . . . . . . . . . . . . . . $0.15Â =1Â pula

Average for the year . . . . . . . . . . . . . . 0.19Â = 1

December 31 . . . . . . . . . . . . . . . . . . . . 0.21Â = 1

In preparing consolidated financial statements, what translationadjustment will Ace report at the end of the current year?

a. $400 positive (credit).

b. $600 positive (credit).

c. $1,400 positive (credit).

d. $1,800 positive (credit).

 

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