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:

Parties' Aspirations

The hopes or goals that individuals or groups aim to achieve in a negotiation or collaborative endeavor, driving their motivation and approach.

Common Ground

Shared interests, beliefs, or understanding among individuals or groups that can form the basis for communication or agreement.

Inaction Strategy

A negotiation approach where one party decides not to take any action as a tactic to influence the negotiation process or outcome.

Integrative Resolution

A conflict resolution method that seeks mutually beneficial outcomes for all parties involved.