Question #12 - Reading 10 Multinational Operations

Reading: Reading 10 Multinational Operations

PDF File: Reading 10 Multinational Operations.pdf

Page: 7

Status: Correct

Correct Answer: A

Shared Context

- Jameson now computes the adjustment to WB's financial data due to Kasamatsu's payment of dividends. What is the U.S. dollar amount of this adjustment (in thousands)? A) $400. B) $414. C) $446.

Question

Having converted all of Kasamatsu's accounts using the current rate methods, Jameson is curious to compare the difference between the temporal and current rate methods on balance sheet accounts. The difference in translated fixed assets and long term debt respectively if Jameson were to use the temporal method rather than the current rate method is: Fixed Assets Long-Term Debt

Answer Choices:

A. $0 $0

B. $1620 $0

C. $1620 $121

Explanation

Fixed assets under the temporal method, are reported at historical translation rates. 486,000 / 100 = $4,860. Under current rate, fixed assets are translated at the current rate (486,000 / 150) = $3,240, a difference of $1,620. Even though it is a balance sheet account, under the temporal method, long term debt is considered a monetary liability and is translated at the current rate. Under the current rate method, long-term debt is also translated at the current rate, so the difference between the two methods is $0.

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