Sharp Company Owns a Japanese Subsidiary, Whose Functional Currency Is

question 60

Multiple Choice

Sharp Company owns a Japanese subsidiary, whose functional currency is the U.S.dollar.On October 15, 2018, when the rate of exchange was 121 yen to $1, the Japanese subsidiary declared and paid a dividend to Sharp of 24,000,000 yen.The dividend represented the net income of the foreign subsidiary for the six months ended June 30, 2018, during which time the weighted average of exchange rates was 125 yen to $1.The rate of exchange in effect at December 31, 2018, was 135 yen to $1.What rate of exchange should be used to translate the dividend for the December 31, 2018 financial statements?

• A)​121 yen to $1
• B)​125 yen to $1
• C)​135 yen to $1
• D)​128 yen to $1

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Definitions:

Order Liquidity

The ease with which an order can be filled in a market without affecting the current price of the asset.

Declaration Dividend

The act of a company's board of directors formally announcing the payment of a dividend to shareholders.

Financial Statements

Reports that summarize the financial activities and condition of a business, including balance sheet, income statement, and cash flow statement.

Stockholders' Equity

The portion of a company's assets that belongs to the shareholders, represented by the company's common stock, preferred stock, and retained earnings.