In the Process of Consolidating the Translated Financial Accounts of a Foreign

question 19

Multiple Choice

In the process of consolidating the translated financial accounts of a foreign operation,what will be the form of the journal entry required to eliminate the foreign currency effect of a purchase of inventory by the subsidiary from the parent entity? Assume that the value of the foreign currency of the foreign operation has increased relative to the reporting currency.

• A)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Foreign currency loss } ( \mathrm { P \& L } ) & \mathrm { X } & \\
• \hline \mathrm { Cr } & \text { Cost of goods sold } & & \mathrm { X } \\
• \hline
• \end{array}\]
• B)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Inventory } & \mathrm { X } & \\
• \hline \mathrm { Cr } & \text { Foreign currency gain } ( \mathrm { P \& L } ) & & \mathrm { X } \\
• \hline
• \end{array}\]
• C)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Inventory } & \mathrm { X } & \\
• \hline \mathrm { Cr } & \text { Foreign currency translation reserve } & & \mathrm { X } \\
• \hline
• \end{array}\]
• D)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Foreign currency translation reserve } & \mathrm { X } & \\
• \hline \mathrm { Cr } & \text { Inventory } & & \mathrm { X } \\
• \hline
• \end{array}\]

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Definitions:

Sample Mean

The average value of a sample set of numbers, calculated by adding all the observations and dividing by the number of observations.

Observations

Data points or values recorded during an experiment or study.

Sample

A subset of individuals, items, or data from a larger population used to estimate characteristics of the whole population.

Mean Times

The average duration or period for an event or series of events.