Patents Are on the Books of a British Subsidiary of a U.S

question 71

Multiple Choice

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 20X3 when the exchange rate was 1 pound = $1.50. The British subsidiary was acquired by the U.S. firm in 20X0 when the exchange rate was 1 pound = $1.40. The exchange rate on December 31, 20X4, the date of the most current balance sheet, is 1 pound = $1.55. The average rate of exchange for 20X4 is $1.53. Assuming the dollar is the functional currency of the subsidiary, what exchange rate will be used to remeasure patents for the consolidated statements dated December 31, 20X4?

• A)$1.40
• B)$1.50
• C)$1.53
• D)$1.55

---

Definitions:

Operating Activities

Activities that are directly related to the day-to-day operations of a business, such as sales, purchase of inventory, and payment of expenses.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue; often referred to as the bottom line.

Transactions

Business activities or exchanges that affect the financial position of a company, involving the transfer of goods, services, money, or titles.

Investing Activities

Financial actions involving the purchase and sale of long-term assets and investments, part of a company's cash flow statement.