江西财经大学高级财务会计国际学院新版题库.docx
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江西财经大学高级财务会计国际学院新版题库.docx
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江西财经大学高级财务会计国际学院新版题库
AdvancedAccounting,11e(Beams/Anthony/Bettinghaus/Smith)
Chapter14ForeignCurrencyFinancialStatements
MultipleChoiceQuestions
1)AU.S.firmhasaBelgiansubsidiarythatusestheBritishpoundasitsfunctionalcurrency.AccordingtoGAAP,theU.S.dollarfromBelgianunit'spointofviewwillbe
A)itsonlyforeigncurrency.
B)itslocalcurrency.
C)itscurrentratemethodcurrency.
D)itsreportingcurrency.
Answer:
D
Objective:
LO1
Difficulty:
Easy
2)SelveyInc.isawholly-ownedsubsidiaryofParsfieldIncorporated,aU.S.firm.ThecountrywhereSelveyoperatesisdeterminedtohaveahighlyinflationaryeconomyaccordingtoGAAPdefinitions.Therefore,forpurposesofpreparingconsolidatedfinancialstatements,thefunctionalcurrencyis
A)itsreportingcurrency.
B)itscurrentratemethodcurrency.
C)theUSdollar.
D)itslocalcurrency.
Answer:
C
Explanation:
C)Selveymustusethefunctionalcurrencyofthereportingentity.
Objective:
LO3
Difficulty:
Easy
3)Allofthefollowingfactorswouldbeusedtodefineaforeignentity'sfunctionalcurrency,except
A)highvolumeofintercompanytransactions.
B)expensesforforeignentityprimarilydrivenbylocalfactors.
C)financingforforeignentitydenominatedinlocalcurrency.
D)foreignentity'sstatusasalocaltaxhavenfortransferpricingpurposes.
Answer:
D
Objective:
LO1
Difficulty:
Easy
4)Theprimarygoalbehindconsolidatingfinancialstatementsofacontrolledsubsidiaryis
A)assuringthatthesubsidiaryfinancialstatementsarethesameunderthetemporalmethodorthecurrentratemethod.
B)assuringthattheindividualnatureofthesubsidiaryentityisnotlostintheconsolidation.
C)representingtheconversionofstatementsatthehistoricalexchangerate.
D)representingthecompany'sunderlyingeconomiccondition.
Answer:
D
Objective:
LO2
Difficulty:
Easy
5)Pelmerhasaforeignsubsidiary,SappCorporationofGermany,whosefunctionalcurrencyistheeuro.Sapp'sbooksaremaintainedineuros.OnDecember31,,SapphasanaccountreceivabledenominatedinBritishpounds.Whichoneofthefollowingstatementsistrue?
A)BecauseallaccountsofthesubsidiaryaretranslatedintoU.S.dollarsatthecurrentrate,theAccountReceivableisnotadjustedonthesubsidiary'sbooksbeforetranslation.
B)TheAccountReceivableisremeasuredintothefunctionalcurrency,thuseliminatingtheneedfortranslation.
C)TheAccountReceivableisfirstadjustedtoreflectthecurrentexchangerateineurosandthentranslatedatthecurrentexchangerateintodollars.
D)TheAccountReceivableisadjustedtoeurosatthecurrentexchangerate,andanyresultinggainorlossisincludedasatranslationadjustmentinthestockholders'equitysectionofthesubsidiary'sseparatebalancesheet.
Answer:
C
Objective:
LO2
Difficulty:
Moderate
6)PaskinCorporation'swholly-ownedCanadiansubsidiaryhasaCanadiandollarfunctionalcurrency.Intranslatingthesubsidiary'saccountbalancesintoU.S.dollarsforreportingpurposes,whichoneofthefollowingaccountswouldbetranslatedathistoricalexchangerates?
A)AccountsReceivable
B)NotesPayable
C)CapitalStock
D)RetainedEarnings
Answer:
C
Objective:
LO2
Difficulty:
Easy
7)AforeignentityisasubsidiaryofaU.S.parentcompanyandhasalwaysusedthecurrentratemethodtotranslateitsforeignfinancialstatementsonbehalfofitsparentcompany.Whichoneofthefollowingstatementsisfalse?
A)TheU.S.dollaristhefunctionalcurrencyofthiscompany.
B)Changesinexchangeratesbetweenthesubsidiary'scountryandtheparent'scountryarenotexpectedtoaffecttheforeignentity'scashflows.
C)Translationadjustmentsareshowninstockholders'equityasincreasesordecreasesinothercomprehensiveincome.
D)Translationadjustmentsarenotshownontheincomestatement.
Answer:
A
Objective:
LO2
Difficulty:
Easy
8)AssumethefunctionalcurrencyofaforeignentityistheU.S.dollar,butthebooksarekeptineuros.Theobjectiveofremeasurementofaforeignentity'saccountsisto
A)producethesameresultsasiftheforeignentity'sbooksweremaintainedinthecurrencyofthelargestcustomer.
B)producethesameresultsasiftheforeignentity'sbooksweremaintainedsolelyinthelocalcurrency.
C)producethesameresultsasiftheforeignentity'sbooksweremaintainedsolelyintheU.S.dollar.
D)producetheresultsreflectiveoftheforeignentity'seconomicsinthelocalcurrency.
Answer:
C
Objective:
LO2
Difficulty:
Easy
9)Whichofthefollowingassetsand/orliabilitiesareconsideredmonetary?
A)IntangibleAssetsandPlant,Property,andEquipment
B)BondsPayableandCommonStock
C)CashandAccountsPayable
D)NotesReceivableandInventoriescarriedatcost
Answer:
C
Objective:
LO2
Difficulty:
Easy
10)WhichofthefollowingstatementsabouttheCurrentRatemethodisfalse?
A)Translationinvolvesrestatingthefunctionalcurrencyamountsintothereportingcurrency.
B)Allassetsandliabilitiesaretranslatedatthecurrentrate.
C)Ifthesubsidiarymaintainstheirbooksintheirfunctionalcurrency,thecurrentratemethodisused.
D)Theeffectofexchangeratechangesarereportedontheincomestatementasaforeignexchangegainorloss.
Answer:
D
Objective:
LO2
Difficulty:
Easy
11)AccountsrepresentinganallowanceforuncollectibleaccountsareconvertedintoU.S.dollarsat
A)historicalrateswhentheU.S.dollaristhefunctionalcurrency.
B)currentratesonlywhentheU.S.dollaristhefunctionalcurrency.
C)historicalratesregardlessofthefunctionalcurrency.
D)currentratesregardlessofthefunctionalcurrency.
Answer:
D
Objective:
LO2
Difficulty:
Easy
12)PalkCorporationhasaforeignsubsidiarylocatedinacountryexperiencinghighratesofinflation.Informationconcerningthiscountry'sinflationrateexperienceisgivenbelow.
ChangeAnnualrate
DateIndexinindexofInflation
January1,90
January1,1203030/100=30.00%
January1,1503030/130=23.08%
January1,2106060/160=37.50%
Theinflationratethatisusedindeterminingifthesubsidiaryisoperatinginahighlyinflationaryeconomyis
A)37.50%.
B)90.58%.
C)133.33%.
D)350.00%.
Answer:
C
Explanation:
C)[(210-90)/90]×100%=133%
Objective:
LO3
Difficulty:
Moderate
13)Atthetimeofabusinessacquisition,
A)identifiableassetsandliabilitiesareallocatedtheportionofthetranslationorremeasurementadjustmentthatexistedonthedateofacquisition.
B)aforeignentity'sassetsandliabilitiesaretranslatedintoU.S.dollarsusingthecurrentexchangerateineffectonthatdate.
C)thedifferencebetweeninvestmentfairvalueandtranslatednetassetsacquiredistreatedasaremeasurementgainorlossontheincomestatement.
D)thedifferencebetweeninvestmentfairvalueandtranslatednetassetsacquiredisrecordedasacumulativetranslationadjustmentonthebalancesheet.
Answer:
B
Objective:
LO4
Difficulty:
Easy
14)Whentranslatingforeignsubsidiaryincomestatementsusingthecurrentratemethod,whyaresomeaccountstranslatedatanaveragerate?
A)Thisapproachimprovesmatching.
B)Thisapproachaccentuatestheconservatismprinciple.
C)Thisapproachsmoothesouthighlyvolatileexchangeratefluctuations.
D)Thisapproachapproximatestheeffectoftransactionswhichoccurcontinuouslyduringtheperiod.
Answer:
D
Objective:
LO5
Difficulty:
Easy
15)ThefollowingassetsofPooleCorporation'sRomaniansubsidiaryhavebeenconvertedintoU.S.dollarsatthefollowingexchangerates:
CurrentHistorical
RatesRates
Accountsreceivable$850,000$875,000
Trademark600,000575,000
Propertyplantandequipment1,200,000900,000
Totals$2,650,000$2,350,000
AssumethefunctionalcurrencyofthesubsidiaryistheU.S.dollarandthebooksarekeptinadifferentcurrency.TheassetsshouldbereportedintheconsolidatedfinancialstatementsofPooleCorporationandSubsidiaryinthetotalamountof
A)$2,325,000.
B)$2,350,000.
C)$2,375,000.
D)$2,650,000.
Answer:
A
Explanation:
A)A/R$850,000+Trademark$575,000+Plant$900,000
Objective:
LO5
Difficulty:
Moderate
16)Whichofthefollowingforeignsubsidiaryaccountswillhavethesamevalueonconsolidatedfinancialstatements,regardlessofwhetherthestatementsareremeasuredortranslated?
A)Trademark
B)DeferredIncome
C)AccountsReceivable
D)Goodwill
Answer:
C
Objective:
LO2
Difficulty:
Easy
17)Exchangegainsorlossesfromremeasurementappear
A)inthecontinuingoperationssectionoftheconsolidatedincomestatement.
B)asanextraordinaryitemontheconsolidatedincomestatement.
C)asothercomprehensiveincometypicallyreportedinastatementofstockholders'equity.
D)asanadjustmenttothebeginningbalanceofretainedearningsontheconsolidatedStatementofretainedearnings.
Answer:
A
Objective:
LO6
Difficulty:
Easy
18)AU.S.parentcorporationloansfundstoaforeignsubsidiarytobeusedtopurchaseequipment.TheloanisdenominatedinU.S.dollarsandthefunctionalcurrencyofthesubsidiaryistheeuro.Thisintercompanytransactionisaforeigncurrencytransactionof
A)neitherthesubsidiarynortheparent,asitiseliminatedaspartoftheconsolidationprocedure.
B)thesubsidiarybutnottheparent.
C)boththesubsidiaryandtheparent.
D)theparentbutnotthesubsidiary.
Answer:
B
Objective:
LO7
Difficulty:
Moderate
19)Aforeignsubsidiary'saccountsreceivablebalanceshouldbetranslatedfortheconsolidatedfinancialstatementsat
A)theappropriatehistoricalrate.
B)theprioryear'sforecastrate.
C)thefuturerateforthenextyear.
D)thespotrateatyear-end.
Answer:
D
Objective:
LO8
Difficulty:
Easy
20)IfaU.S.co
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