3/29/2021

CHAPTER 1 CHAPTER 3
1.D 6.B 11.D 16.D 21.D 26.B 1. C 6.D 11.B 16.A 21.D 26.B 31.D 36.A 41.D 46.C 51.A
2.D 7.A 12.A 17.D 22.B 27.C 2.B 7.C 12.C 17.B 22.B 27.B 32.D 37.C 42.B 47.C 52.B
3.D 8.A 13.C 18.B 23.C 28.D 3.B 8.A 13.B 18.A 23.C 28.A 33.B 38.A 43.A 48.C 53.C
4.D 9.B 14.B 19.A 24.D 29.B 4.A 9.D 14.D 19.A 24.B 29.D 34.C 39.D 44.B 49.A 54.B
5.C 10.C 15.C 20.B 25.B 30.C 5.D 10.B 15.A 20.B 25.C 30.B 35.D 40.C 45.D 50.B 55.D

CHAPTER 2 CHAPTER 4
1. D 6.B 11.B 16.A 20.B 25.D 30.B 1.D 6.B 11.D 16.C 21.D 26.C 31.D 36.B 41.A 46.D
2.B 7.A 12.C 17.A 22.D 27.D 32.C 37.D 42.D 47.D
2.D 7.B 12.B 17.B 21.C 26.B 31.C
3.A 8.B 13.D 18.C 23.C 28.A 33.B 38.D 43.D 48.
3.A 8.A 13.D 18.C 22.D 27.B 32.B 4.C 9.A 14.A 19.D 24.A 29.D 34.B 39.C 44.D 49.
4.D 9.C 14.A 23.C 28.A 33.A 5.C 10.C 15.B 20.B 25.B 30.B 35.B 40.A 45.D 50.
5.C 10.A 15.B 19.C 24.B 29.B 34.D

CHAPTER 6
1.D
2.B
3.A
6.B
7.C
8.B
11.A
12.C
13.A
16.B
17.B
18.D
21.D
22.B
23.C
26.B
27.D
28.B
31.B
32.C
33.B
36.B
37.A
38.C
41.D
42.C
43.B
46.B
47.C
48.B
51.A
52.C
53.C
56.B
57.A
58.C
EX 10 – p317
4.D 9.C 14.B 19.A 24.D 29.A 34.D 39.C 44.D 49.D 54.C 59.D

CHAPTER 7
5.D 10.B 15.C 20.C 25.B 30.B 35.C 40.B 45.C 50.B 55.C 60.C

FUNTIONAL CURRENCY – ĐỒNG TIỀN CHỨC NĂNG

Đồng tiền chức năng:

được định nghĩa là đơn vị tiền tệ
của môi trường kinh tế chủ yếu
mà đơn vị hoạt động
Chú ý:
Đồng tiền chức năng có thể là
đồng tiền công ty mẹ sử dụng
hoặc đồng ngoại tệ (tại nước sở
tại của công ty con)

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10.
a. Because the foreign currency is the functional currency,
the current rate method is appropriate. All assets are
translated at current rates.
The correct answer is ₣670,000 [₣100,000 + 200,000 +
120,000 + 250,000].
EX 11 – p317
b. Because the U.S. dollar is the functional currency, the
temporal method is appropriate. All receivables are
remeasured at current rates. Assets carried at historical cost,
such as marketable securities, prepaid insurance and goodwill CHAPTER 7
are remeasured at historical rates.

The correct answer is ₣770,000 [₣100,000 + 240,000 +

130,000 + 300,000].

11.
a. Current Rate Method
Exchange
CNY Rate SGD

Cost of goods sold 1,300,000 0.207 269,100

Ending inventory 250,000 0.204 51,000

b. Temporal Method
Exchange
CNY Rate SGD
Beginning inventory 550,000 0.210 115,500
Purchases 1,000,000 0.207 207,000
Ending inventory (250,000) 0.205 (51,250)
Cost of goods sold 1,300,000 271,250

Ending inventory 250,000 0.205 51,250

EX 13 – p318
CHAPTER 7

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Exchange
Schilling Rate Koruna

Net assets, 1/1/Y1 1,200,000 0.82 984,000 EX 14 – p318

Increase in net assets:
Net income, Year 1 400,000 0.85 340,000
Net assets, 12/31/Y1 1,600,000 1,324,000 CHAPTER 7
Net assets, 12/31/Y1 at
the current exchange rate 1,600,000 0.88 1,408,000
Translation adjustment (positive) (84,000)

Exchange
Pesos Rate US$
Net monetary assets, 1/1/Y1 1,000,000 $.09 90,000
INCREASE IN MONETARY ITEMS:
Sales, Year 1 500,000 $0.85 42,500
DECREASE IN MONETARY ITEMS:
Purchases of inventory, Year 1 (300,000) $0.85 (25,500)
Purchase of PPE, 1/1/Y1 (600,000) $0.9 (54,000)
Dividends, 12/1/Y1 (100,000) $0.8 (8,000)
Net monetary assets, 12/31/Y1 500,000 45,000

Net monetary assets, 12/31/Y1

at the current exchange rate 500,000 $0.78 39,000
Remeasurement loss 6,000

EX 15 – p319
CHAPTER 7

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a. Economic Relevance of Translation Adjustment

Swiss franc is functional currency (Current rate ✓ The translation adjustment increases stockholders’ equity by
a. method) $246,000.
Swiss Exchange U.S. ✓ The positive translation adjustment arises because the
Francs Rate Dollars
Swiss subsidiary has a net asset position of CHF8,200,000
Net assets, 12/20/Y1 8,200,000 1.00 8,200,000 and the Swiss franc appreciates by $.03 [CHF8,200,000 x
Change in net assets - - $.03 = $246,000].
✓ The positive translation adjustment is not realized in terms
Net assets, 12/31/Y1 8,200,000 8,200,000 of U.S. dollar cash flow. It would be a realized gain only if
TBD sold this operation on December 31 for exactly
Net assets, 12/31/Y1 at CHF8,200,000 and converted the sales proceeds into
the current exchange rate 8,200,000 1.03 8,446,000 dollars at the current exchange rate of $1.03 per Swiss
Translation adjustment
franc.
(positive) (246,000)

b. U.S. dollar is functional currency (Temporal method) Economic Relevance of Remeasurement Loss
✓ The remeasurement loss arises because the Swiss subsidiary has a net
Swiss Exchange U.S.
monetary liability position of CHF800,000 (Cash of CHF1,000,000
Francs Rate Dollars
Net monetary liabilities, less Notes payable of CHF1,800,000) and the Swiss franc has
12/20/Y1 (800,000) 1.00 (800,000) appreciated by $.03 [CHF800,000 x $.03 = $24,000].
Change in net monetary ✓ The loss is unrealized. It would be realized only if the Swiss subsidiary
liabilities - - used its Swiss franc cash to pay off Swiss franc notes payable to the
Net monetary liabilities, extent possible (CHF1,000,000), and the parent paid off the
12/31/Y1 (800,000) (800,000) remaining Swiss franc notes payable using U.S. dollars, thereby
realizing a transaction loss of $24,000 [CHF800,000 x ($1.03 -
Net monetary liabilities,
$1.00)]. (A CHF 800,000 note payable could have been paid off at
12/31/Y1
at the current exchange rate (800,000) 1.03 (824,000) December 1 with $800,000 [CHF800,000 x $1.00]. At December 31,
Remeasurement loss 24,000 it takes $824,000 to pay off the same amount of CHF note payable
[CHF800,000 x $1.03].)

EX 16 – p319
CHAPTER 7

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Exchange Rates $/Cz Exchange Rates $/Cz

January 1, Year 1 0.84 January 1, Year 1 0.84
Average for Year 1 0.80 Average for Year 1 0.80
December 31, Year 1 0.75 December 31, Year 1 0.75
Average for Year 2 0.72 Average for Year 2 0.72
December 1, Year 2 0.71 December 1, Year 2 0.71
December 31, Year 2 0.70 December 31, Year 2 0.70

Exchange
Cz Rate $ Cz Rate $

Sales 540,000 0.72 388,800 Retained earnings, 1/1/Y2 154,000 0.80 123,200
Cost of goods sold (310,000) 0.72 (223,200)
Gross profit 230,000 165,600 Net income 82,000 above 59,040
Operating expenses (108,000) 0.72 (77,760)
Income before tax 122,000 87,840 Dividends (20,000) 0.71 (14,200)
Income taxes (40,000) 0.72 (28,800)
Net income 82,000 59,040 Retained earnings, 12/31/Y2 216,000 168,040

Exchange Rates $/Cz Exchange

January 1, Year 1 0.84 Cz rate $
Average for Year 1 0.80 Net assets, 1/1/Y1 50,000 0.84 42,000
December 31, Year 1 0.75 Net income, Year 1 154,000 0.80 123,200
Average for Year 2 0.72
December 1, Year 2 0.71 Net assets, 12/31/Y1 204,000 165,200
December 31, Year 2 0.70 Net assets, 12/31/Y1 at
current exchange rate 204,000 0.75 153,000
Exchange
Translation adjustment, Year 1
Cz Rate $ (negative) 12,200
Cash 50,000 0.70 35,000
Net assets, 1/1/Y2 204,000 0.75 153,000
Receivables 100,000 0.70 70,000
Inventory 72,000 0.70 50,400 Net income, Year 2 82,000 0.72 59,040
Plant and equipment 300,000 0.70 210,000
Less: accumulated depreciation (70,000) 0.70 (49,000) Dividends, 12/1/Y2 (20,000) 0.71 (14,200)
Total assets 452,000 316,400
Net assets, 12/31/Y2 266,000 197,840
Liabilities 186,000 0.70 130,200 Net assets, 12/31/Y2 at
Capital stock 50,000 0.84 42,000 current exchange rate 266,000 0.70 186,200
Translation adjustment, Year 2
Retained earnings, 12/31/Y2 216,000 above 168,040
(negative) 11,640
Cumulative translation adjustment - (23,840) Cumulative translation
Total liabilities and stockholders' equity 452,000 316,400 adjustment, 12/31/Y2 23,840

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EX 17 – p321
CHAPTER 7

Exchange Rates USD/ZAR Exchange Rates USD/ZAR

January 1, Year 1 0.090
June 1, Year 1 0.095 EX17 – January 1, Year 1 0.090
June 1, Year 1 0.095 EX17 – CURRENT
Average for Year 1
November 15, Year 1
0.096
0.100
CURRENT Average for Year 1 0.096
METHOD
November 15, Year 1 0.100
December 1, Year 1
December 31, Year 1
0.105
0.110
METHOD December 1, Year 1 0.105
December 31, Year 1 0.110
South African rand is functional currency (Current rate method)
ZAR Rate USD
a.
Retained earnings, 1/1/Y1 - -
Exchange
ZAR Rate USD
Sales 1,000,000 0.096 96,000 Net income, Year 1 110,000 10,560
Cost of goods sold (600,000) 0.096 (57,600)
Gross profit 400,000 38,400 Dividends, 6/1/Y1 (20,000) 0.095 (1,900)
Depreciation expense (50,000) 0.096 (4,800)
Other operating expenses (150,000) 0.096 (14,400) Dividends, 12/1/Y1 (20,000) 0.105 (2,100)
Income before tax 200,000 19,200
Income taxes (90,000) 0.096 (8,640) Retained earnings, 12/31/Y1 70,000 6,560
Net income 110,000 10,560

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ZAR Rate USD EX17 –

Cash
Receivables
80,000
150,000
0.110
0.110
8,800
16,500 CURRENT
Inventory
Plant and equipment
270,000
500,000
0.110
0.110
29,700
55,000
Calculation of cumulative translation
adjustment
METHOD
Less: acc depreciation (50,000) 0.110 (5,500) Exchange
Total assets 950,000 104,500 ZAR Rate USD
Net assets, 1/1/Y1 300,000 0.090 27,000
Accounts payable 80,000 0.110 8,800 Net income, Year 1 110,000 above 10,560
Long-term debt 500,000 0.110 55,000
Common stock 300,000 0.090 27,000 Dividends, 6/1/Y1 (20,000) 0.095 (1,900)
RE, 12/31/Y1 70,000 6,560
Cumulative Dividends, 12/1/Y1 (20,000) 0.105 (2,100)
translation Net assets, 12/31/Y1 370,000 33,560
EX17 – adjustment - 7,140 Net assets, 12/31/Y1 at
CURRENT Total liabilities and current exchange rate 370,000 0.110 40,700
METHOD stockholders'
Translation adjustment, Year 1
(positive) (7,140)
equity 950,000 104,500

Exchange Rates USD/ZAR

EX17 – January 1, Year 1 0.090
June 1, Year 1 0.095
TEMPORAL Average for Year 1 0.096
METHOD November 15, Year 1 0.100
December 1, Year 1 0.105
December 31, Year 1 0.110
ZAR Rate USD
Cash 80,000 0.110 8,800
Receivables 150,000 0.110 16,500

EX17 – TEMPORAL METHOD Inventory

Plant and equipment
270,000
500,000
0.100
0.090
27,000
45,000

Less: accumulated depreciation (50,000) 0.090 (4,500)

Total assets 950,000 92,800

Accounts payable 80,000 0.110 8,800

Long-term debt 500,000 0.110 55,000
Common stock 300,000 0.090 27,000
Retained earnings, 12/31/Y1 70,000 2,000
Total liabilities and stockholders'
equity 950,000 92,800

Exchange Rates USD/ZAR

Exchange Rates USD/ZAR
EX17 – TEMPORAL METHOD January 1, Year 1 0.090
EX17 – January 1, Year 1 0.090 June 1, Year 1
Average for Year 1
0.095
0.096
TEMPORAL June 1, Year 1
Average for Year 1
0.095
0.096
U.S. dollar is functional currency
November 15, Year 1
December 1, Year 1
0.100
0.105
METHOD November 15, Year 1
December 1, Year 1
0.100
0.105
b. (Temporal method) December 31, Year 1 0.110

December 31, Year 1 0.110 Exchange

ZAR Rate USD
Sales 1,000,000 0.096 96,000
ZAR Rate USD
Cost of goods sold (600,000) Sched. A (56,520)
Retained earnings, 1/1/Y1 - - Gross profit 400,000 39,480
Net income 110,000 6,000 Depreciation expense (50,000) 0.090 (4,500)
Other operating expenses (150,000) 0.096 (14,400)
Dividends, 6/1/Y1 (20,000) 0.095 (1,900)
Remeasurement gain (loss) - below (5,940)
Dividends, 12/1/Y1 (20,000) 0.105 (2,100) Income before tax 200,000 14,640
Retained earnings, 12/31/Y1 70,000 2,000 Income taxes (90,000) 0.096 (8,640)
Net income 110,000 6,000

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EX17 – TEMPORAL
Calculation of remeasurement gain METHOD
EX17 – Exchange Rates
January 1, Year 1
USD/ZAR
0.090
(loss)

TEMPORAL June 1, Year 1

Average for Year 1
0.095
0.096
Exchange
METHOD November 15, Year 1 0.100
Net monetary liabilities, 1/1/Y1
ZAR
(200,000)
Rate
0.090
USD
(18,000)
December 1, Year 1 0.105
December 31, Year 1 0.110 Increase in monetary assets
Sales 1,000,000 0.096 96,000
Decrease in monetary assets -
Schedule A. Exchange Purchases of inventory (870,000) 0.096 (83,520)
Calculation of cost of goods sold ZAR Rate USD Other operating expenses (150,000) 0.096 (14,400)
Beginning inventory - - Income taxes (90,000) 0.096 (8,640)
Dividends, 6/1/Y1 (20,000) 0.095 (1,900)
Purchases 870,000 0.0960 83,520
Dividends, 12/1/Y1 (20,000) 0.105 (2,100)
Net monetary liabilities, 12/31/Y1 (350,000) (32,560)
Ending inventory (270,000) 0.1000 (27,000)
Net monetary liabilities, 12/31/Y1 at
Cost of goods sold 600,000 56,520 current exchange rate (350,000) 0.110 (38,500)
Remeasurement loss 5,940