The Deter Company operates a subsidiary in the UK, and the functional currency is the British pound. The subsidiary’s 2001 income statement shows L500 of net income and a L50 dividend that was paid on December 31, when the exchange rate was $1.50 per pound. The current exchange rate is $1.65 per pound, and the average rate is $1.58 per pound. What is the change in retained earnings for the period in U.S. dollars under the provisions of SFAS 52? A) $725. B) $715. C) $746. D) $750
b
B?
lc=fc so all current NI @ average = $790 -divd @ historical = (75) RE=715
That’s what I did, but wouldn’t it be calculated the exact same way in this case if it was Translation
prooooooooooceeed to L3. good work gents.
it wouldn’t work perfectly with what they gave you for temporal b/c you’d have to do each thing out to get NI- COGS and Depr would be historical. so this would be an all around sucky question if this was all they gave you and temporal.
Can someone address my q, i just want to make sure that my train of thought is correct here in thinking that for these calcs the functional currency doesnt matter as it would be handled the same in either method.
Oh, right. Cool.
this is the 1 thing i’m really good @ for some reason. no, net inc would be different under translation b/c it’s a mixed bag. sales are average rate, but cogs & depreciation are historical. we’d have to be given more info to solve in that case. plus NI would include translation adjustment
Boarding a very fast moving thread here but could’t resist the ans to this is B 
LOL no time for waiting- only 8 days til go time. it’s bang bang from here on in. ng30- if you’re going to be good at something, this is not a bad thing to be good at!