Answered

Welcome to Westonci.ca, the place where your questions find answers from a community of knowledgeable experts. Discover detailed solutions to your questions from a wide network of experts on our comprehensive Q&A platform. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

Patents are on the books of a British subsidiary of a U.S. firm at a value of 50,000 pounds. The patents were acquired in 2017 when the exchange rate was 1 pound = $1.50. The British subsidiary was acquired by the U.S. firm in 2019 when the exchange rate was 1 pound = $1.40. The exchange rate on December 31, 2020, the date of the most current balance sheet, is 1 pound = $1.55. The average rate of exchange for 2020 is $1.53. Assuming the dollar is the functional currency of the subsidiary, what exchange rate will be used to re-measure patents for the consolidated statements dated December 31, 2020?

Sagot :

anthougo

Answer:

The exchange rate that will be used to re-measure patents for the consolidated statements dated December 31, 2020 is:

= 1 pound = $1.55.

Explanation:

a) Data and Calculations:

Patents on the books of a British subsidiary = 50,000 pounds

Patent's acquisition date = 2017 at 1 pound = $1.50

Subsidiary's acquisition date = 2019 at 1 pound = $1.40

Current exchange rate, most current balance sheet on December 31, 2020 = 1 pound = $1.55.

Average rate of exchange for 2020 is $1.53

Value of Patent for the consolidated accounts = $77,500 (50,000 pounds * $1.55)

b) The accounting standard rule is that assets and liabilities of subsidiaries should be consolidated at the current exchange rates.  Business transactions are translated at the average rate of exchange for the year.  For equity accounts, you can use either the current or historical exchange rates.

We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Your questions are important to us at Westonci.ca. Visit again for expert answers and reliable information.