Question #68

of 126 Which of the following statements is NOT a characteristic of the current rate method of accounting for foreign currency translation? A) All asset accounts are translated at the current rate of exchange as of the balance sheet date. B) The common stock account is translated at the rate of exchange that applied when the equity was issued. C) Nonmonetary liabilities are translated at the historical rate of exchange. Della Air Lines has recently acquired Australian Puddle Jumpers, Inc. (APJ), a small airline located in Sydney. The Australian dollar has been chosen by Della as the functional currency for APJ. The balance sheet of APJ is given below as of Dec. 31, 2011 in U.S. dollars. Assets Liabilities and Equity Cash $100 Accounts Payable (A/P) $90 Accounts Receivable (A/R) 120 Common Stock 360 Maintenance Supplies 90 Fixed Assets 140 Total Assets $450 Total Liabilities & Equity $450 APJ's income statement for the year ending Dec. 31, 2012 is expressed in Australian dollars as: Sales 3,500 Total Costs 2,900 Net Income 600 The Australian dollar has steadily depreciated against the U.S. dollar. At Dec. 31, 2011, the exchange rate was A$/US$ 2.50, the average rate during the year was A$/US$ 2.75 and A$/US$ 3.0 on Dec. 31, 2012. The Dec. 31, 2012 Balance Sheet for APJ is given in Australian dollars as follows: Assets Liabilities and Equity Cash 441 A/P 210 A/R 330 Common Stock 720 Supplies 291 Retained Earnings 600 Fixed Assets 468 Total Assets 1,530 Total Liabilities & Equity 1,530