A USParent Purchased a Foreign Subsidiary Last Year at a Price

question 23

Short Answer

A U.S.parent purchased a foreign subsidiary last year at a price in excess of the subsidiary's book value.The subsidiary's functional currency is the foreign currency.This excess is assumed to be traceable to undervalued equipment.When the parent company prepares its elimination entries for the excess, which of the following combinations of exchange rates should be used? ?
$\begin{array}{llcc} \text { Equipment } & \text { Depreciation Expense} \\\end{array}$
A) $\begin{array}{llcc} \text { Historical } &&& \text {Current } \\\end{array}$
B) $\begin{array}{llcc} \text { Current } &&& \text {Historical } \\\end{array}$
C) $\begin{array}{llcc} \text { Historical } && \text { Average } \\\end{array}$
D) $\begin{array}{llcc} \text { Current} &&& \text { Average } \\\end{array}$

• A)\(\begin{array}{llcc}
• \text { Historical } &&& \text {Current } \\
• \end{array}\)
• B)\(\begin{array}{llcc}
• \text { Current } &&& \text {Historical } \\
• \end{array}\)
• C)\(\begin{array}{llcc}
• \text { Historical } && \text { Average } \\
• \end{array}\)
• D)\(\begin{array}{llcc}
• \text { Current} &&& \text { Average } \\
• \end{array}\)

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Definitions:

Cation Exchange

Process in which root cells secrete protons (H+), which replace cations adhering to soil particles, thereby releasing them for absorption by the roots.

Positively Charged

Refers to particles or objects that have more protons than electrons, resulting in a net positive electric charge.

Major Function

The primary role or purpose that something serves or is designed to perform.

Stomata

Tiny openings or pores in plant tissue that allow for gas exchange, including the intake of carbon dioxide and release of oxygen.