A US Company Has a Subsidiary Located in Great Britain

question 60

Multiple Choice

A U.S. company has a subsidiary located in Great Britain. Information for the subsidiary for the year ended December 31, 2006, is as follows:
$\begin{array}{ll}&\text { British pound }\\\text { Gross profit margin } & 40 \% \\\text { Inventory } & 2,000\\\\&\text { Exchange Rate }\\\text { Balance sheet date } & 1 \text { pound }=\$ 1.6 \\\text { Average exchange rate } & 1 \text { pound }=\$ 1.5 \\\text { Historical rate } & 1 \text { pound }=\$ 1.4\end{array}$

-After converting to U.S. dollars using the appropriate method, gross profit margin is 40%. What method is being used to record British subsidiaries financial statements?

• A)The current rate method
• B)The temporal method
• C)The conversion method
• D)Not determinable from information given

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Definitions:

Withdrawn-Rejected

A type of childhood rejection, when other children do not want to be friends with a child because of his or her timid, withdrawn, and anxious behavior.

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Longitudinal Study

A research design that follows the same subjects over a period of time, allowing for the examination of changes and developments.