# The following account balances are available for Esposito

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## The following account balances are available for Esposito

Use
the following to answer questions 46-49:

The
following account balances are available for Esposito, an Italian U.S.
subsidiary for 2004:

Beginning
inventory

â¬ 20,000

Purchases

400,000

Ending
inventory

15,000

Relevant
exchange rates follow:

4th
quarter average, 2003

\$.93 = â¬1

December 31,
2003

. 94 =
1

Average 2004

.96 =
1

4th
quarter average, 2004

.99 =
1

December 31,
2004

1.01 =
1

46. Compute
the cost of goods sold for 2004 in U.S. dollars using the temporal method.
A) \$376,650.

B) \$387,750.

C) \$388,800.

D) \$400,950.

E) \$409,050.

47. Compute
the cost of goods sold for 2004 in U.S. dollars using the current rate method.
A) \$376,550.

B) \$387,750.

C) \$388,800.

D) \$400,950.

E) \$409,050.

48. Compute
ending inventory for 2004 under the temporal method.
A) \$13.950.

B) \$14,100.

C) \$14,400.

D) \$14,850.

E) \$15,150.

49. Compute
ending inventory for 2004 under the current rate method.
A) \$13.950.

B) \$14,100.

C) \$14,400.

D) \$14,850.

E) \$15,150.

Use
the following to answer questions 50-51:

The
following inventory balances for 2004 in local currency units (LCU) are given:

Inventory at
cost

320,000 LCU

Inventory at
replacement cost

300,000

Inventory at
net realizable value

420,000

Inventory at
net realizable value

Less normal profit margin

400,000

The following
exchange rates are given for 2004:

January 1, 2004

\$1.50 = 1 LCU

Average, 2004

1.48 = 1

4th
quarter average, 2004

1.43 = 1

December 31,
2004

1.42 = 1

50. Compute
the December 31, 2004, inventory balance using the lower of cost or market
method under the temporal method.
A) \$426,000.

B) \$457,000.

C) \$596,000.

D) \$568,000.

E) \$473,600.

51. Compute
the December 31, 2004, inventory balance using the current rate method.
A) \$426,000.

B) \$457,000.

C) \$596,000.

D) \$568,000.

E) \$473,600.

Use
the following to answer questions 52-57:

On
January 1, 2004, Rosato Company, an Italian subsidiary of a U.S. company has
the following fixed asset balances:

Fixed assets

â¬600,000

Accumulated
depreciation

150,000

Book value

â¬450,000

The
fixed assets have a 10-year remaining life.

Rosato
was acquired on January 1, 2000, when the exchange rate was \$.97 = â¬1. On January 1, 2003, Rosato purchased
equipment for â¬20,000 with a useful life of five years. Straight-line depreciation is used. Relevant exchange rates are given as follows:

January 1, 2003

\$1.01 = â¬1

January 1, 2004

.98
= 1

Average, 2004

.995 =
1

52. Assuming
the euro is the functional currency, what amount will be shown for consolidated
fixed assets at December 31, 2004?
A) \$607,600.

B) \$509,600.

C) \$504,400.

D) \$601,400.

E) \$601,600.

53. Assuming
the euro is the functional currency, what amount will be shown for consolidated
accumulated depreciation at December 31, 2004?
A) \$235,550.

B) \$228,340.

C) \$226,330.

D) \$151,500.

E) \$147,000

54. Assuming
the euro is the functional currency, what amount will be shown for consolidated
depreciation expense at December 31, 2004?
A) \$48,655.

B) \$47,530.

C) \$48,020.

D) \$48,755.

E) \$47,690.

55. Assuming
the U.S. dollar is the functional currency, what amount will be shown for
consolidated fixed assets at December 31, 2004?
A) \$607,600.

B) \$509,600.

C) \$504,400.

D) \$601,400.

E) \$601,600.

56. Assuming
the U.S. dollar is the functional currency, what amount will be shown for
consolidated accumulated depreciation at December 31, 2004?
A) \$235,550.

B) \$228,340.

C) \$226,330.

D) \$151,500.

E) \$147,000

57. Assuming
the U.S. dollar is the functional currency, what amount will be shown for
consolidated depreciation expense at December 31, 2004?
A) \$48,655.

B) \$47,530.

C) \$48,020.

D) \$48,755.

E) \$47,690.

Use
the following to answer questions 58-59:

Perez
Company, a Mexican subsidiary of a U.S. company, sold equipment costing 200,000
pesos with accumulated depreciation of 75,000 pesos for 140,000 pesos on March
1, 2004. The equipment was purchased on
January 1, 1998, when the exchange rate for the peso was \$.11. Relevant exchange rates for the peso are as
follows:

January 1, 2004

\$.107

March 1, 2004

.106

December 31,
2004

.102

Average, 2004

.105

58. The
financial statements for Perez are translated by its U.S. parent. What amount of gain or loss would be reported
in its translated income statement?
A) \$1,530.

B) \$1,575.

C) \$1,465.

D) \$1,090.

E) \$1,650.

59. The
financial statements for Perez are remeasured by its U.S. parent. What amount of gain or loss would be reported
in its translated income statement?
A) \$1,530.

B) \$1,575.

C) \$1,465.

D) \$1,090.

E) \$1,650.

Use
the following to answer questions 60-62:

Certain
balance sheet accounts of a foreign subsidiary of Parker Company at December
31, 2004, have been restated into U.S. dollars as follows:

Restated at

Current Rates

Historical Rates

Cash

\$ 47,500

\$ 45,000

Accounts
receivable

95,000

90,000

Inventory, at
market

76,000

72,000

Land

57,000

54,000

Equipment (net)

142,500

135,000

Total

\$418,000

\$396,000

60. Assuming
the functional currency of the subsidiary is the U.S. dollar, what total should
be included in Parker’s consolidated balance sheet at December 31, 2004, for
the above items?
A) \$407,500.

B) \$418,000.

C) \$396,000.

D) \$403,500.

E) \$398,500.

61. Assuming
the functional currency of the subsidiary is the local currency, what total
should be included in Parker’s consolidated balance sheet at December 31, 2004,
for the above items?
A) \$407,500.

B) \$418,000.

C) \$396,000.

D) \$403,500.

E) \$398,500.

62. If
the current rate used to restate these balances is \$.95, what was the
historical rate used to restate the same balances?
A) \$ .90.
B) \$1.00.

C) \$ .95.
D) \$ \$9474.
E) \$1.0556.

International House, 12 Constance Street, London, United Kingdom,
E16 2DQ

Company # 11483120

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