DeGaulle Enterprises,a Subsidiary of Clinton Company Based in New York,reported

question 47

Multiple Choice

DeGaulle Enterprises,a subsidiary of Clinton Company based in New York,reported the following information at the end of its first year of operations (all in French francs) : assets--4,790,000; expenses--6,500,000; liabilities--2,950,000; capital stock--1,200,000,revenues--7,140,000.Relevant exchange rates are as follows:

As a result of the translation process,what amount is recorded on the financial statements as the translation adjustment?

• A)$1,287 debit adjustment
• B)$1,287 credit adjustment
• C)$6,080 debit adjustment
• D)$6,080 credit adjustment

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Definitions:

Carrying Value

The net amount at which an asset or liability is valued on the balance sheet, also known as book value, factoring in depreciation, impairments, and amortization.

Fair Value Hedge

A hedge that is used to mitigate the risk of changes in the fair value of an asset or liability or an unidentified portion of such an asset or liability.

Fair Market Value

An estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller in the market.

Interest Rate Swap

A financial derivative contract whereby two parties exchange interest rate cash flows, often swapping a fixed rate for a floating rate, or vice versa, to manage exposure to interest rate fluctuations.