IQ Has a Wholly Owned Subsidiary in China

question 32

Multiple Choice

IQ has a wholly owned subsidiary in China. This subsidiary is dependent on IQ for financing and sales. How should foreign exchange gains on translation of the subsidiary's statements to Canadian dollars be reported on IQ's consolidated financial statements?

• A)Gains should be credited directly to shareholders' equity.
• B)Gains should be reported on the balance sheet as deferred credits and amortized in a systematic and rational manner.
• C)Gains from current monetary assets should be credited to income, and any gains from long-term nonmonetary assets should be deferred and amortized.
• D)Gains from current monetary assets and any gains from long-term monetary assets should be credited to income.

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Definitions:

Postponement

A supply chain strategy that delays the final assembly or customization of a product until the latest possible time to better match demand and reduce inventory costs.

Overall Profits

The total financial gain obtained by a business after subtracting all expenses from the revenue.

Manufacturing Expense

Costs directly associated with the production of goods, including materials, labor, and factory overhead expenses.

Single Product

A business strategy or production model focused on the manufacture or sale of one specific product.