Question 1

An increase in the exchange rate between a transaction date and the date of payment will cause the debtor to incur a loss.

Accepted Answer

A) True 
 B)False

Question 2

Listed below are several terms and statements with missing expressions. Fill in the blanks with the appropriate term.
$$\begin{array} { | l | l | l | } 
\hline \text { Multiply } & \text { Weak exchange } & \text { International Accounting Standards Board } \
\hline \text { Divide } & \text { Strong exchange } & \text { Hedging } \
\hline \text { Market economy } & \text { Foreign trade zones } & \text { Translating } \
\hline \text { Planned economy } & \text { Foreign Corrupt Practices Act } & \text { International licensing } \
\hline
\end{array}$$
(1) To convert a foreign currency to an equivalent dollar amount _________ the foreign currency by the foreign exchange rate.
(2) To convert a dollar amount into an equivalent amount of foreign currency ___________ the dollar amount by the exchange rate.
(3) The __________ prohibits companies engaged in global activities from bribing officials of foreign countries.
(4) Goods imported into __________ are duty free.
(5) ___________ minimizes or eliminates the risk of loss associated with foreign currency fluctuations.
(6) In a __________ ownership of land and the means of production are privately held.
(7) In a __________ the government allocates resources and determines output among various segments of the economy.
(8) The process of restating an amount of foreign currency in terms of the equivalent number of dollars is called ________ the foreign currency.
(9) A currency is described as ___________ when its exchange rate is rising relative to other currencies.
(10) A currency is described as __________ when its exchange rate is falling in relation to other currencies.

Accepted Answer

(1) Multiply
(2) Divide
(3) Fo

Question 3

The Foreign Corrupt Practices Act distinguishes between influence peddling and facilitating payments. Peddling is prohibited, while facilitating payments are allowed.

Accepted Answer

A) True 
 B)False

Question 4

The number of dollars equivalent to F1F1F1S1F1F1F105,250,000 on this date is:

Accepted Answer

A)  $40,110.00. 
B)  $687,172.50. 
C)  $87,225.50. 
D)  Depends upon whether the item is a receivable or a payable. 
A)  $40,110.00. 
B)  $687,172.50. 
C)  $87,225.50. 
D)  Depends upon whether the item is a receivable or a payable.

Question 5

A dollar that is stronger than the British pound would make travel to the United States more attractive to British citizens.

Accepted Answer

A) True 
 B)False

Question 6

Although cultural differences are significant in business dealings, they pose no difficulties to the design and implementation of an accounting system.

Accepted Answer

A) True 
 B)False

Question 7

A contract giving the right to receive a specified quantity of foreign currency at a future date is known as:

Accepted Answer

A)  Hedging. 
B)  Exchange rates. 
C)  Maquilladora. 
D)  Future contracts. 
A)  Hedging. 
B)  Exchange rates. 
C)  Maquilladora. 
D)  Future contracts.

Question 8

In Japan, financial reporting requirements are based primarily on the need to provide information to:

Accepted Answer

A)  Investors. 
B)  Government agencies. 
C)  Banks. 
D)  U.S. subsidiaries of Japanese companies. 
A)  Investors. 
B)  Government agencies. 
C)  Banks. 
D)  U.S. subsidiaries of Japanese companies.

Question 9

In a planned economy, the government uses central planning to allocate resources and determines output among various segments of the economy.

Accepted Answer

A) True 
 B)False

Question 10

Establishing international accounting standards is the responsibility of:

Accepted Answer

A)  Securities and Exchange Commission. 
B)  International Accounting Standards Board. 
C)  Financial Accounting Standards Board. 
D)  Accounting Association of America. 
A)  Securities and Exchange Commission. 
B)  International Accounting Standards Board. 
C)  Financial Accounting Standards Board. 
D)  Accounting Association of America.

Question 11

Gains and losses from fluctuations in exchange rates on transactions carried out in a foreign currency are reported in:

Accepted Answer

A)  The balance sheet, as an adjustment to stockholders' equity. 
B)  The income statement. 
C)  The footnotes to the financial statements. 
D)  The statement of retained earnings. 
A)  The balance sheet, as an adjustment to stockholders' equity. 
B)  The income statement. 
C)  The footnotes to the financial statements. 
D)  The statement of retained earnings.

Question 12

The Foreign Corrupt Practices Act (FCPA) imposes _____ for managers who engage in bribes.

Accepted Answer

A)  Fines 
B)  Deportation 
C)  Quotas 
D)  Taxes 
A)  Fines 
B)  Deportation 
C)  Quotas 
D)  Taxes

Question 13

On January 1, a German company purchased merchandise from a U.S. firm for $50,000, payable on March 1. The exchange rate for euros on January 1 was $0.70. If the exchange rate increases to $0.72 on March 1, what amount of gain or loss would the U.S. firm report related to currency fluctuation?

Accepted Answer

A)  $1,000 gain. 
B)  $1,000 loss. 
C)  $500 gain. 
D)  No gain or loss would be reported. 
A)  $1,000 gain. 
B)  $1,000 loss. 
C)  $500 gain. 
D)  No gain or loss would be reported.

Question 14

The Foreign Corrupt Practices Act (FCPA) affects all of the following except:

Accepted Answer

A)  United States companies. 
B)  Foreign companies operating in the United States. 
C)  Foreign companies operating solely in their home country. 
D)  Affiliates and agents of a United States company or a foreign company operating in the United States. 
A)  United States companies. 
B)  Foreign companies operating in the United States. 
C)  Foreign companies operating solely in their home country. 
D)  Affiliates and agents of a United States company or a foreign company operating in the United States.

Question 15

Which of the following is not true regarding the above sales transaction to Music of Mexico?

Accepted Answer

A)  Brown recognizes a loss on fluctuation of foreign currency in the amount of $4.65 in 2011. 
B)  Brown recognizes a gain on fluctuation of foreign currency in the amount of $4.80 in 2012. 
C)  Brown has incurred an overall loss of $1.60 on fluctuation of foreign currency in the period from December 10, 2011 to February 8, 2012. 
D)  Brown could have avoided any loss due to fluctuations in foreign currency by setting the sales price of the cassettes in terms of U.S. dollars instead of pesos. 
A)  Brown recognizes a loss on fluctuation of foreign currency in the amount of $4.65 in 2011. 
B)  Brown recognizes a gain on fluctuation of foreign currency in the amount of $4.80 in 2012. 
C)  Brown has incurred an overall loss of $1.60 on fluctuation of foreign currency in the period from December 10, 2011 to February 8, 2012. 
D)  Brown could have avoided any loss due to fluctuations in foreign currency by setting the sales price of the cassettes in terms of U.S. dollars instead of pesos.

Question 16

The accounting profession has been slow to develop in Asian countries because of strict governmental control of accounting regulations.

Accepted Answer

A) True 
 B)False

Question 17

Companies choose a standard exchange rate to compute the cost buildup in their domestic currency.

Accepted Answer

A) True 
 B)False

Question 18

"Convergence" means abandoning a country's financial reporting standards and replacing them with:

Accepted Answer

A)  International Accounting Standards. 
B)  International Financial Accounting Standards. 
C)  Generally Accepted Accounting Principles. 
D)  Securities and Exchange Commission Principles. 
A)  International Accounting Standards. 
B)  International Financial Accounting Standards. 
C)  Generally Accepted Accounting Principles. 
D)  Securities and Exchange Commission Principles.

Question 19

Assume the exchange rate for the Canadian dollar is rising relative to the U.S. dollar. An American company will incur losses from this rising exchange rate if it is making:

Accepted Answer

A)  Credit sales to Canadian companies at prices stated in Canadian dollars. 
B)  Credit purchases from Canadian companies at prices stated in U.S. dollars. 
C)  Credit sales to Canadian companies at prices stated in U.S. dollars. 
D)  Credit purchases from Canadian companies at prices stated in Canadian dollars. 
A)  Credit sales to Canadian companies at prices stated in Canadian dollars. 
B)  Credit purchases from Canadian companies at prices stated in U.S. dollars. 
C)  Credit sales to Canadian companies at prices stated in U.S. dollars. 
D)  Credit purchases from Canadian companies at prices stated in Canadian dollars.

Question 20

The journal entry to record the sale in Brown's accounting records on December 10, 2011, includes:

Accepted Answer

A)  A debit to Accounts Receivable for 16,000 pesos. 
B)  A credit to Sales for $2,560. 
C)  A debit to Loss on Fluctuation of Foreign Currency for $260. 
D)  No entry is made until year-end on this type of transaction. 
A)  A debit to Accounts Receivable for 16,000 pesos. 
B)  A credit to Sales for $2,560. 
C)  A debit to Loss on Fluctuation of Foreign Currency for $260. 
D)  No entry is made until year-end on this type of transaction.

Exam 15: Global Business and Accounting

An increase in the exchange rate between a transaction date and the date of payment will cause the debtor to incur a loss.

The Foreign Corrupt Practices Act distinguishes between influence peddling and facilitating payments. Peddling is prohibited, while facilitating payments are allowed.

The number of dollars equivalent to 5,250,000 on this date is:

A dollar that is stronger than the British pound would make travel to the United States more attractive to British citizens.

Although cultural differences are significant in business dealings, they pose no difficulties to the design and implementation of an accounting system.

A contract giving the right to receive a specified quantity of foreign currency at a future date is known as:

In Japan, financial reporting requirements are based primarily on the need to provide information to:

In a planned economy, the government uses central planning to allocate resources and determines output among various segments of the economy.

Establishing international accounting standards is the responsibility of:

Gains and losses from fluctuations in exchange rates on transactions carried out in a foreign currency are reported in:

The Foreign Corrupt Practices Act (FCPA) imposes _____ for managers who engage in bribes.

On January 1, a German company purchased merchandise from a U.S. firm for $50,000, payable on March 1. The exchange rate for euros on January 1 was $0.70. If the exchange rate increases to $0.72 on March 1, what amount of gain or loss would the U.S. firm report related to currency fluctuation?

The Foreign Corrupt Practices Act (FCPA) affects all of the following except:

Which of the following is not true regarding the above sales transaction to Music of Mexico?

The accounting profession has been slow to develop in Asian countries because of strict governmental control of accounting regulations.

Companies choose a standard exchange rate to compute the cost buildup in their domestic currency.

"Convergence" means abandoning a country's financial reporting standards and replacing them with:

Assume the exchange rate for the Canadian dollar is rising relative to the U.S. dollar. An American company will incur losses from this rising exchange rate if it is making:

The journal entry to record the sale in Brown's accounting records on December 10, 2011, includes:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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