Area II: Technical Accounting — CPA Practice Question 10

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Identify the method: Functional = Local Currency -> Current Rate Method. Assets/Liabilities = Current Rate. Income = Average Rate. Equity (Stock) = Historical Rate. RE = Roll forward.

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D.Historical Rate for Common Stock; Rolled-forward amount for Retained Earnings✓ Correct

D

ASC 830 requires that when the functional currency is the local currency, the Current Rate Method is used. Assets and liabilities use the spot rate at the balance sheet date. Equity items like Common Stock use historical rates. Retained Earnings is not translated at a single rate but is a roll-forward calculation.

Common mistakes

Using the current rate for all balance sheet items including equity.

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Common mistakes

Practice the full CPA BAR Practice Exam 5

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