Pelmer Has a Foreign Subsidiary,Sapp Corporation of Germany,whose Functional Currency

question 18

Multiple Choice

Pelmer has a foreign subsidiary,Sapp Corporation of Germany,whose functional currency is the euro.Sapp's books are maintained in euros.On December 31,2014,Sapp has an account receivable denominated in British pounds.Which one of the following statements is true?

• A)Because all accounts of the subsidiary are translated into U.S.dollars at the current rate,the Account Receivable is not adjusted on the subsidiary's books before translation.
• B)The Account Receivable is remeasured into the functional currency,thus eliminating the need for translation.
• C)The Account Receivable is first adjusted to reflect the current exchange rate in euros and then translated at the current exchange rate into dollars.
• D)The Account Receivable is adjusted to euros at the current exchange rate,and any resulting gain or loss is included as a translation adjustment in the stockholders' equity section of the subsidiary's separate balance sheet.

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Definitions:

Situational Contingencies

Refers to external or internal factors that influence the effectiveness of management strategies and decision-making processes.

Organizational Design

The process of structuring an organization in a way that facilitates achieving its goals effectively and efficiently.

Formal Authority

The right bestowed upon an individual or unit to make decisions, command obedience, and enforce rules within an organization's hierarchy.

Situational Contingencies

External factors or circumstances that influence the outcome of a decision or action and must be considered in planning and execution.