Boerkian Co Assume Boerkian Was a Foreign Subsidiary of a U

question 14

Essay

Boerkian Co. started 2013 with two assets: Cash of §26,000 (Stickles) and Land that originally cost §72,000 when acquired on April 4, 2010. On May 1, 2013, the company rendered services to a customer for §36,000, an amount immediately paid in cash. On October 1, 2013, the company incurred an operating expense of §22,000 that was immediately paid. No other transactions occurred during the year so an average exchange rate is not necessary. Currency exchange rates were as follows: $\begin{array}{ll}\text { April } 4,2010 & \S 1=\$ .28 \\\text { January } 1,2013 & \S 1=\$ .29 \\\text { May } 1,2013 & \S 1=\$ .30 \\\text { October } 1,2013 & \S 1=\$ .31 \\\text { December } 31,2013 & \S 1=\$ .35\end{array}$ Assume Boerkian was a foreign subsidiary of a U.S. multinational company and the U.S. dollar was the functional currency of the subsidiary. Prepare a schedule of changes in the net monetary assets of Boerkian for the year 2013 and properly label the resulting gain or loss.

---

Definitions:

Optimal Consumption Bundle

The blend of items and services that enhances a buyer's fulfillment to the fullest within their spending ability.

Consumption Bundle

A combination of goods and services that a consumer chooses to consume within a given time period.

Income

Funds acquired regularly as earnings from employment or investment returns.

Substitution Effect

The change in consumption patterns due to a change in relative prices, holding the consumer's utility level constant.