Question

In foreign branch, fixed assets shall be converted at:
A. Opening rate
B. Closing rate
C. Average rate
D. None of these

Answer 1

Heya user!

Option A, opening rate.

Answer 2

Answer:

The correct option is (A) Opening Rate.

Explanation:

Foreign Branch:

• A foreign branch is simply an independent branch that is located outside of the country and keeps its accounts in a foreign currency.
• Because the foreign branch trail balance will be in the currencies of the country in which the branch is operating, the head office must convert the trial balance received into its own currency before incorporating the trial balance into its books of accounts.

Fluctuating Rate of exchange:

When there is a violent fluctuation in the exchange rate, the head office and branch will adopt a standard rate for conversion, and all items in the Trial Balance will be converted at the standard rate, which can be one of the three types listed below:

(a) The opening rate (b) the closing rate (c) the average rate

Fixed assets:

• At the rate in effect at the time the asset was purchased, or at the actual cost of the remittance sent and used for the acquisition. It is referred to as the opening rate.
• When capital expenditure is spread over a period, however, the average rate for that period may be used.
• These assets include: a building, land, machinery, furniture, and so on.

Hence, in foreign branch, fixed assets shall be converted at the Opening Rate.

#SPJ2