CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Assume that on April 1 a non-US based subsidiary buys marketable securities and inventories on its balance sheet valued in the local currency (LC) at 100,000 LC each that are both remaining as of December 31. The relevant exchange rates are as follows:

January 1: $0.15=1LC
April 1: $0.16=1LC
December 31: $0.19=1 LC

Assume the $US is the subsidiary's functional currency. On a consolidated balance sheet as of December 31, what balances are reported?
A. Securities = $19,000 and Inventory = $16,000.
B. Securities = $15,000 and Inventory = $15,000.
C. Securities = $19,000 and Inventory = $15,000.
Explanation: If the $US is the functional currency, the temporal method must be used. Under the temporal method, monetary assets (securities) are remeasured at current exchange rates and nonmonetary assets (inventory) are remeasured at historical exchange rates.

User Contributed Comments 2

User Comment
turtle inventories were bought on 1st April for the equivqlent of 16.000 USD.
mazen1967 The marketable securties is a monetary assets, and cash and AR are also monetary assets
You need to log in first to add your comment.