Explanation:
When translating financial statements using the current rate method (which applies when the functional currency differs from the parent's presentation currency):
Given:
Calculation: GBP 5,000,000 × 1.40 USD/GBP = USD 7,000,000
Therefore, the subsidiary's total assets reported on the parent's consolidated balance sheet are USD 7.00 million.
Ultimate access to all questions.
The UK subsidiary of a US parent company has GBP as its functional currency. To translate the subsidiary's GBP financial statements into USD for consolidation purposes, the following exchange rate information was gathered:
| USD/GBP |
|---|
| Beginning of the year |
| Average for the year |
| End of the year |
Note: USD/GBP is the amount of USD per 1 GBP
The subsidiary reports total assets of GBP 5 million on its balance sheet at fiscal year end. The subsidiary's total assets reported on the parent's consolidated balance sheet are:
A
A USD 6.50 million.
B
B USD 6.75 million.
C
C USD 7.00 million.
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