Question #102 - Reading 10 Multinational Operations

Reading: Reading 10 Multinational Operations

PDF File: Reading 10 Multinational Operations.pdf

Page: 57

Status: Unattempted

Shared Context

- If Jameson wishes to convert any of the figures on Kasamatsu's Income Statement from yen to dollars, she should most appropriately use which of the following exchange rates (yen/$)? A) 140. B) 145. C) 150.

Question

Jameson has finally completed translating all the necessary figures into dollars and now wants to compute by how much WB's reported sales in dollars will change due to Kasamatsu's sales. Which of the following is closest to the amount of sales that WB will report as a result of Kasamatsu's operations (in thousands of dollars)?

Answer Choices:

A. $4,828

B. $5,000

C. $4,667

Explanation

The current rate method is used when the Functional Currency is NOT the same as the Parent's Presentation (reporting) Currency. The basis for using the temporal method is when the Functional Currency = the Parent's Presentation Currency. Because sales as a financial item is on the income statement, the 2013 average exchange rate of 140 JPY/USD must be used to calculate sales in the reporting currency. Kasamatsu's sales were JPY 700,000. The calculation is: WB will report $5,000 of sales as a result of Kasamatsu's operations.

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