The Following Balance Sheet Accounts of a Foreign Subsidiary at December

question 6

Multiple Choice

The following balance sheet accounts of a foreign subsidiary at December 31, 2014, have been translated into Canadian dollars as follows: $\begin{array}{lrrr}&\text { Translated at }\\&\text { Current Rates }&\text {Historical Rates }\\\text { Accounts receivable, current } & \$ 600,000 & \$ 660,000 \\\text { Accounts receivable, long-term } & 300,000 & 324,000 \\\text { Inventories carried at market } & 180,000 & 198,000 \\\text { Goodwill } & 190,000 & 220,000\\&\$1,270,000&\$1,402,000\end{array}$
What total should be included in the translated balance sheet at December 31, 2014 for the above items? Assume the Canadian dollar is the functional currency.

• A)$1,270,000
• B)$1,288,000
• C)$1,300,000
• D)$1,354,000

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Definitions:

Profit-Maximizing

a strategy or process where a firm determines the price, output level, and production scale that lead to the highest possible profit, under certain market conditions.

Profit

The profit achieved when the revenue from business operations surpasses the combined total of expenses, costs, and taxes needed to maintain those operations.

Loss

Loss refers to the negative financial result that occurs when expenses exceed revenues or costs outweigh benefits in a transaction or operation.

Service

An intangible economic activity that satisfies a need or wants, often performed by humans or automated systems.