FREN 111 Chapter Notes - Chapter 2: Commuter Town, Falafel, Banlieue
Get access
Related Questions
Which of the following statements is CORRECT?
The cash flows relevant for a foreign investment should, from the parent company's perspective, include the financial cash flows that the subsidiary can legally send back to the parent company plus the cash flows that must remain in the foreign country. | ||
When considering the risk of a foreign investment, a lower risk might arise from exchange rate risk and political risk while higher risk might result from international diversification. | ||
The United States and most other major industrialized nations currently operate under a system of floating exchange rates. | ||
LIBOR is an acronym for London Interbank Offer Rate, which is an average of interest rates offered by London banks to smaller U.S. corporations | ||
Due to advanced communications technology and the standardization of general procedures, working capital management for multinational firms is no more complex than it is for large domestic firms. |
Watson Company has a subsidiary in the country of Alonza wherethe local currency unit is the kamel (KM). On December 31, 2014,the subsidiary has the following balance sheet: |
Cash | KM | 15,000 | Notes payable (due 2016) | KM | 28,500 |
Inventory | 23,500 | Common stock | 30,000 | ||
Land | 5,000 | Retained earnings | 15,000 | ||
Building | 60,000 | ||||
Accumulateddepreciation | (30,000) | ||||
KM | 73,500 | KM | 73,500 | ||
The subsidiary acquired the inventory on August 1, 2014, and theland and buildings in 2000. It issued the common stock in 1998.During 2015, the following transactions took place: |
2015 | |
Feb. 1 | Paid 16,000 KM onthe note payable. |
May 1 | Sold entireinventory for 31,500 KM on account. |
June 1 | Sold land for 6,100KM cash. |
Aug. 1 | Collected allaccounts receivable. |
Sept.1 | Signed long-termnote to receive 10,500 KM cash. |
Oct. 1 | Bought inventory for15,000 KM cash. |
Nov. 1 | Bought land for5,000 KM on account. |
Dec. 1 | Declared and paid4,000 KM cash dividend to parent. |
Dec. 31 | Recordeddepreciation for the entire year of 3,000 KM. |
The exchange rates for 1 KM are as follows: |
1998 | 1 KM | = | $ | 0.26 |
2000 | 1 | = | 0.24 | |
August 1, 2014 | 1 | = | 0.34 | |
December 31,2014 | 1 | = | 0.36 | |
February 1,2015 | 1 | = | 0.38 | |
May 1, 2015 | 1 | = | 0.40 | |
June 1, 2015 | 1 | = | 0.42 | |
August 1, 2015 | 1 | = | 0.44 | |
September 1,2015 | 1 | = | 0.46 | |
October 1, 2015 | 1 | = | 0.48 | |
November 1,2015 | 1 | = | 0.50 | |
December 1,2015 | 1 | = | 0.52 | |
December 31,2015 | 1 | = | 0.56 | |
Average for2015 | 1 | = | 0.46 | |
If this is a translation, what is the translation adjustmentdetermined solely for 2015? |