A 100 percent–owned foreign subsidiary’s trial balance consists of the accounts listed as follows. Which exchange rate—current, historical, or average—would be used to translate these accounts to parent currency assuming that the foreign currency is the functional currency? Which rates would be used if the parent currency were the functional currency?
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Trial Balance Accounts |
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Cash |
Common stock |
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Marketable securities (cost) |
Premium on common stock |
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Accounts receivable |
Retained earnings |
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Inventory (market) |
Sales |
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Equipment |
Purchases |
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Accumulated depreciation |
Cost of sales |
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Prepaid expenses |
General and administrative expenses |
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Goodwill |
Selling expenses |
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Accounts payable |
Depreciation |
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Due to parent (denominated in dollars) |
Amortization of goodwill |
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Bonds payable |
Income tax expense |
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Income taxes payable |
Intercompany interest expense |
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Deferred income taxes |
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