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Answer: No
## Explanation Under the **current rate method**: - All income statement items are translated at the **average exchange rate** during the period - Translation gains/losses go to **Other Comprehensive Income (OCI)** in equity - **Operating income is NOT affected** by translation adjustments Under the **temporal method**: - Some income statement items (like COGS, depreciation) may be translated at historical rates - Translation gains/losses go to the **income statement** - **Operating income IS affected** by translation adjustments Since the question specifies the **current rate method** was used, and translation gains/losses go to equity rather than affecting operating income, the choice of reporting method **did not affect** reported operating income. Therefore, the correct answer is **A**: No.
Author: LeetQuiz Editorial Team
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Masswell corporation opens a foreign subsidiary and elects to report the subsidiary's results using the current rate method. During the first year of operations, the foreign currency depreciates against Masswell's home currency. Did the choice of reporting method affect Masswell's reported operating income?
A
No
B
Yes, operating income was lower than it would have been under the temporal method
C
Yes, operating income was higher than it would have been under the temporal method
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