Certain Balance Sheet Accounts of a Foreign Subsidiary of Parker

question 28

Multiple Choice

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2013, have been restated into U.S. dollars as follows: $\begin{array}{lrr}&\text { Restated at }\\&\text { Current Rates } & \text { Historical Rates } \\\text { Cash } & \$ 47,500 & \$ 45,000 \\\text { Accounts receivable } & 95,000 & 90,000 \\\text { Inventory, at market } & 76,000 & 72,000 \\\text { Land } & 57,000 & 54,000 \\\text { Equipment (net) } & \underline{142,500} & 135,000 \\\quad \text { Total } & \$ 418,000 & \$ 396,000\end{array}$ If the current rate used to restate these amounts is $.95, what was the average historical rate used to arrive at the total amount for historical rates?

• A)$0.9000.
• B)$1.0000.
• C)$0.9500.
• D)$0.9474.
• E)$1.0556.

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Definitions:

Marginal Product

The additional output resulting from the use of one more unit of a productive input, holding other inputs constant.

Production Function

An equation that describes the maximum output of a good achieved from a given number of inputs.

Input

The inputs such as labor, materials, or resources utilized in creating products and services.

Convexity

In economics and finance, convexity refers to the shape of the curve that demonstrates how the duration of a bond changes as the interest rate changes.