Question 1

Under the current rate method,

Accepted Answer

A) income statement items are to be translated at the exchange rate at the dates the items are recognized. 
B) since a) is generally impractical, an appropriately weighted average exchange rate for the period may be used for translation. 
C) all balance sheet accounts are translated at the current exchange rate, except stockholders' equity. 
D) all of the above 
A) income statement items are to be translated at the exchange rate at the dates the items are recognized. 
B) since a) is generally impractical, an appropriately weighted average exchange rate for the period may be used for translation. 
C) all balance sheet accounts are translated at the current exchange rate, except stockholders' equity. 
D) all of the above

Question 2

XYZ Corporation,a U.S.parent firm,has a wholly owned sales affiliate,ABC Ltd.,in the United Kingdom.The affiliate was established to service to the local market. Assume that:
1)the functional currency of ABC is the pound
2)the reporting currency is the dollar
3)the initial exchange rate $1.00 = £ 0.67
ABC's nonconsolidated balance sheets and the footnotes to the financial statements indicate that ABC owes the parent firm £200,000.Assume that,XYZ had made an investment of $500,000 in the affiliate.Under FASB 52,the intercompany debt and investment will appear on the consolidated balance sheet as

Accepted Answer

A) £200,000. 
B) $201,493. 
C) $298,507. 
D) none of the above 
A) £200,000. 
B) $201,493. 
C) $298,507. 
D) none of the above

Question 3

Translation exposure,

Accepted Answer

A) is not entity specific, rather it is currency specific. 
B) is not currency specific, rather it is entity specific. 
C) involves restatement from Italian to French. 
D) none of the above 
A) is not entity specific, rather it is currency specific. 
B) is not currency specific, rather it is entity specific. 
C) involves restatement from Italian to French. 
D) none of the above

Question 4

Which of the above statements pertain to FASB 52?

Accepted Answer

A) (i) 
B) (i) and (ii) 
C) (iii) and (iv) 
D) (i), (ii), and (iii) 
A) (i) 
B) (i) and (ii) 
C) (iii) and (iv) 
D) (i), (ii), and (iii)

Question 5

The underlying principle of the current/noncurrent method is

Accepted Answer

A) assets and liabilities should be translated based on their maturity. 
B) monetary balance sheet accounts should be translated at the spot rate; nonmonetary accounts are translated at the historical rate in effect when the account was first recorded. 
C) monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates. 
D) all balance sheet accounts are translated at the current exchange rate, except stockholders' equity. 
A) assets and liabilities should be translated based on their maturity. 
B) monetary balance sheet accounts should be translated at the spot rate; nonmonetary accounts are translated at the historical rate in effect when the account was first recorded. 
C) monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates. 
D) all balance sheet accounts are translated at the current exchange rate, except stockholders' equity.

Question 6

With regard to translation exposure versus operating exposure

Accepted Answer

A) upper management should be more concerned with translation exposure. 
B) any discussion really involves speculation about foreign exchange rate changes. 
C) upper management should be more concerned with operating exposure. 
D) none of the above 
A) upper management should be more concerned with translation exposure. 
B) any discussion really involves speculation about foreign exchange rate changes. 
C) upper management should be more concerned with operating exposure. 
D) none of the above

Question 7

Translation exposure measures

Accepted Answer

A) the effect that an anticipated change in exchange rates will have on the consolidated financial reports of an MNC. 
B) economic exposure. 
C) the change in the value of a foreign subsidiaries assets and liabilities denominated in a foreign currency, as a result of exchange rate change fluctuations, when viewed from the perspective of the parent firm. 
D) all of the above 
A) the effect that an anticipated change in exchange rates will have on the consolidated financial reports of an MNC. 
B) economic exposure. 
C) the change in the value of a foreign subsidiaries assets and liabilities denominated in a foreign currency, as a result of exchange rate change fluctuations, when viewed from the perspective of the parent firm. 
D) all of the above

Question 8

A highly inflationary economy is defined in FASB 52 as

Accepted Answer

A) one that has cumulative inflation of approximately 100 percent or more over a 3-year period. 
B) one that has current inflation of approximately 40 percent per year. 
C) one that has going-forward expected inflation of approximately 40 percent per year. 
D) none of the above 
A) one that has cumulative inflation of approximately 100 percent or more over a 3-year period. 
B) one that has current inflation of approximately 40 percent per year. 
C) one that has going-forward expected inflation of approximately 40 percent per year. 
D) none of the above

Question 9

When using the current/noncurrent method,

Accepted Answer

A) most income statement items are translated at the average exchange rate for the accounting period. 
B) revenue and expense items that are associated with noncurrent assets or liabilities are translated at the historical rate that applies to the applicable balance sheet items. 
C) depreciation expense is translated at the historical rate that applies to the applicable depreciable asset items. 
D) all of the above 
A) most income statement items are translated at the average exchange rate for the accounting period. 
B) revenue and expense items that are associated with noncurrent assets or liabilities are translated at the historical rate that applies to the applicable balance sheet items. 
C) depreciation expense is translated at the historical rate that applies to the applicable depreciable asset items. 
D) all of the above

Question 10

The extent to which the value of the firm would be affected by unexpected changes in the exchange rate is

Accepted Answer

A) transaction exposure. 
B) translation exposure. 
C) economic exposure. 
D) none of the above 
A) transaction exposure. 
B) translation exposure. 
C) economic exposure. 
D) none of the above

Question 11

Which of the following are true?

Accepted Answer

A) Some items that are a source of transaction exposure are also a source of translation exposure. 
B) Some items that are a source of transaction exposure are NOT also a source of translation exposure. 
C) Both a and b 
D) None of the above 
A) Some items that are a source of transaction exposure are also a source of translation exposure. 
B) Some items that are a source of transaction exposure are NOT also a source of translation exposure. 
C) Both a and b 
D) None of the above

Question 12

The underlying principle of the current/noncurrent method is that assets and liabilities should be translated based on their maturity.

Accepted Answer

A) Current assets and liabilities are converted at the current exchange rate in effect when the cash flow associated with the asset or liability actually occurred.Non-current assets and liabilities are translated at the historical exchange rate that prevailed when the asset was recognized. 
B) Current assets and liabilities, which by definition have a maturity of one year or less, are converted at the current exchange rate.Non-current assets and liabilities are translated at the historical exchange rate. 
C) All assets and liabilities are converted at the current exchange rate. 
D) None of the above 
A) Current assets and liabilities are converted at the current exchange rate in effect when the cash flow associated with the asset or liability actually occurred.Non-current assets and liabilities are translated at the historical exchange rate that prevailed when the asset was recognized. 
B) Current assets and liabilities, which by definition have a maturity of one year or less, are converted at the current exchange rate.Non-current assets and liabilities are translated at the historical exchange rate. 
C) All assets and liabilities are converted at the current exchange rate. 
D) None of the above

Question 13

Under the monetary/nonmonetary method,revenue and expense items associated with nonmonetary accounts,such as cost of goods sold and depreciation,are translated at the historical rate associated with the balance sheet account.

Accepted Answer

A) True 
 B)False

Question 14

According to the monetary/nonmonetary method,monetary balance sheet accounts include

Accepted Answer

A) for example, cash, marketable securities, accounts receivable, notes payable, accounts payable of a foreign subsidiary. 
B) for example stockholders' equity and long term debt. 
C) for example inventory paid for in cash, but not working capital. 
D) COGs, sales, net income. 
A) for example, cash, marketable securities, accounts receivable, notes payable, accounts payable of a foreign subsidiary. 
B) for example stockholders' equity and long term debt. 
C) for example inventory paid for in cash, but not working capital. 
D) COGs, sales, net income.

Question 15

In highly inflationary economies,FASB 52 requires that the foreign entities' financial statement be remeasured from the local currency "as if the functional currency were the reporting currency".The purpose of this requirement is

Accepted Answer

A) to prevent large important balance sheet accounts, carried at historical values, from having insignificant values once translated into the reporting currency at the current rate. 
B) to prevent games playing in the accounting books. 
C) to prevent having to restate the books at a later date. 
D) none of the above 
A) to prevent large important balance sheet accounts, carried at historical values, from having insignificant values once translated into the reporting currency at the current rate. 
B) to prevent games playing in the accounting books. 
C) to prevent having to restate the books at a later date. 
D) none of the above

Question 16

The "functional currency" is defined in FASB 52 as

Accepted Answer

A) the currency of the primary economic environment in which the entity operates. 
B) the currency in which the MNC prepares its consolidated financial statements. 
C) a currency that is not the parent firm's home country currency. 
D) both b and c 
A) the currency of the primary economic environment in which the entity operates. 
B) the currency in which the MNC prepares its consolidated financial statements. 
C) a currency that is not the parent firm's home country currency. 
D) both b and c

Question 17

Which of the following is a translation method where the gain or loss due to translation adjustment does not affect reported cash flows?

Accepted Answer

A) Current/noncurrent method 
B) Current rate method 
C) Current/future method 
D) Short/long term method 
A) Current/noncurrent method 
B) Current rate method 
C) Current/future method 
D) Short/long term method

Question 18

The source of translation exposure

Accepted Answer

A) is a mismatch of net assets and net liabilities denominated in the same currency. 
B) is a mismatch of net assets and net liabilities denominated in different currencies. 
C) is a mismatch of current assets and current liabilities denominated in different currencies. 
D) none of the above 
A) is a mismatch of net assets and net liabilities denominated in the same currency. 
B) is a mismatch of net assets and net liabilities denominated in different currencies. 
C) is a mismatch of current assets and current liabilities denominated in different currencies. 
D) none of the above

Question 19

The underlying principle of the monetary/nonmonetary method is

Accepted Answer

A) assets and liabilities should be translated based on their maturity. 
B) monetary balance sheet accounts should be translated at the spot rate; nonmonetary accounts are translated at the historical rate in effect when the account was first recorded. 
C) monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates. 
D) all balance sheet accounts are translated at the current exchange rate, except stockholders' equity. 
A) assets and liabilities should be translated based on their maturity. 
B) monetary balance sheet accounts should be translated at the spot rate; nonmonetary accounts are translated at the historical rate in effect when the account was first recorded. 
C) monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates. 
D) all balance sheet accounts are translated at the current exchange rate, except stockholders' equity.

Question 20

Fill out the 20 missing entries that translate the balance sheet and income statement for this French subsidiary using the Current/Noncurrent Method,the Monetary/Nonmonetary Method,the Temporal Method,and the Current Rate Method

Accepted Answer

The answer of Fill out the 20 missing entries that...

Under the current rate method,

Translation exposure,

Which of the above statements pertain to FASB 52?

The underlying principle of the current/noncurrent method is

With regard to translation exposure versus operating exposure

Translation exposure measures

A highly inflationary economy is defined in FASB 52 as

When using the current/noncurrent method,

The extent to which the value of the firm would be affected by unexpected changes in the exchange rate is

Which of the following are true?

The underlying principle of the current/noncurrent method is that assets and liabilities should be translated based on their maturity.

Under the monetary/nonmonetary method,revenue and expense items associated with nonmonetary accounts,such as cost of goods sold and depreciation,are translated at the historical rate associated with the balance sheet account.

According to the monetary/nonmonetary method,monetary balance sheet accounts include

In highly inflationary economies,FASB 52 requires that the foreign entities' financial statement be remeasured from the local currency "as if the functional currency were the reporting currency".The purpose of this requirement is

The "functional currency" is defined in FASB 52 as

Which of the following is a translation method where the gain or loss due to translation adjustment does not affect reported cash flows?

The source of translation exposure

The underlying principle of the monetary/nonmonetary method is

Fill out the 20 missing entries that translate the balance sheet and income statement for this French subsidiary using the Current/Noncurrent Method,the Monetary/Nonmonetary Method,the Temporal Method,and the Current Rate Method

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 10: Management of Translation Exposure

Under the current rate method,

Translation exposure,

Which of the above statements pertain to FASB 52?

The underlying principle of the current/noncurrent method is

With regard to translation exposure versus operating exposure

Translation exposure measures

A highly inflationary economy is defined in FASB 52 as

When using the current/noncurrent method,

The extent to which the value of the firm would be affected by unexpected changes in the exchange rate is

Which of the following are true?

The underlying principle of the current/noncurrent method is that assets and liabilities should be translated based on their maturity.

Under the monetary/nonmonetary method,revenue and expense items associated with nonmonetary accounts,such as cost of goods sold and depreciation,are translated at the historical rate associated with the balance sheet account.

According to the monetary/nonmonetary method,monetary balance sheet accounts include

In highly inflationary economies,FASB 52 requires that the foreign entities' financial statement be remeasured from the local currency "as if the functional currency were the reporting currency".The purpose of this requirement is

The "functional currency" is defined in FASB 52 as

Which of the following is a translation method where the gain or loss due to translation adjustment does not affect reported cash flows?

The source of translation exposure

The underlying principle of the monetary/nonmonetary method is

Fill out the 20 missing entries that translate the balance sheet and income statement for this French subsidiary using the Current/Noncurrent Method,the Monetary/Nonmonetary Method,the Temporal Method,and the Current Rate Method

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters