CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Delnora Company owns a foreign subsidiary with 3,600,000 local currency units (LCU) of plant assets before accumulated depreciation on December 31, 2012. Of this amount, LCU2,400,000 were acquired in 2010, when the exchange rate was LCU1.6 to $1, and LCU1,200,000 were acquired in 2011, when the exchange rate was LCU1.8 to $1. The exchange rate in effect on December 31, 2012, was LCU2 to $1. The weighted average of exchange rates that were in effect during 2012 was LCU1.92 to $1. Assuming that the plant assets are depreciated by the straight-line method over a 10-year economic life with no residual value, how much depreciation expense relating to the foreign subsidiary's plant assets is reported in Delnora's income statement for 2012 if the U.S. dollar is the functional currency of the subsidiary?
A. $187,500
B. $200,000
C. $216,667

User Contributed Comments 5

User Comment
mm05 240000/1.6+120000/1.8
siggy25 remeasuerd by temporal method
heinzlive If the average x-change rates were given, would it be compulsory to calculate the depreciation expense with the "blended rates"??
paolino9290 Since under the temporal method, nonmonetary assets are carried at historical cost, then also related expenses (ie depreciation) are translated using exchange rates at the time the purchase was made.
bjw699 how bout an explanation, AN?
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