Question 1

Under the current rate method, how would cost of goods sold be translated?

Accepted Answer

A)  Beginning of the year rate. 
B)  Average rate. 
C)  Current rate. 
D)  Historical rate. 
E)  Composite amount. 
A)  Beginning of the year rate. 
B)  Average rate. 
C)  Current rate. 
D)  Historical rate. 
E)  Composite amount.

Question 2

When consolidating a foreign subsidiary, which of the following statements is true?

Accepted Answer

A)  Parent reports a cumulative translation adjustment from adjusting its investment account under the equity method. 
B)  Parent reports a gain or loss in net income from adjusting its investment account under the equity method. 
C)  Subsidiary's cumulative translation adjustment is carried forward to the consolidated balance sheet. 
D)  Subsidiary's income/loss is carried forward to the consolidated balance sheet. 
E)  All foreign currency gains/losses are eliminated in the consolidated income statement and balance sheet. 
A)  Parent reports a cumulative translation adjustment from adjusting its investment account under the equity method. 
B)  Parent reports a gain or loss in net income from adjusting its investment account under the equity method. 
C)  Subsidiary's cumulative translation adjustment is carried forward to the consolidated balance sheet. 
D)  Subsidiary's income/loss is carried forward to the consolidated balance sheet. 
E)  All foreign currency gains/losses are eliminated in the consolidated income statement and balance sheet.

Question 3

Under the current rate method, retained earnings would be translated at what rate?

Accepted Answer

A)  Beginning of the year rate. 
B)  Average rate. 
C)  Current rate. 
D)  Historical rate. 
E)  Composite amount. 
A)  Beginning of the year rate. 
B)  Average rate. 
C)  Current rate. 
D)  Historical rate. 
E)  Composite amount.

Question 4

Under the current rate method, common stock would be translated at what rate?

Accepted Answer

A)  Beginning of the year rate. 
B)  Average rate. 
C)  Current rate. 
D)  Historical rate. 
E)  Composite amount. 
A)  Beginning of the year rate. 
B)  Average rate. 
C)  Current rate. 
D)  Historical rate. 
E)  Composite amount.

Question 5

According to U.S. GAAP for a local currency perspective, which method is usually required for translating a foreign subsidiary's financial statements into the parent's reporting currency?

Accepted Answer

A)  The temporal method. 
B)  The current rate method. 
C)  The current/noncurrent method. 
D)  The monetary/nonmonetary method. 
E)  The noncurrent rate method. 
A)  The temporal method. 
B)  The current rate method. 
C)  The current/noncurrent method. 
D)  The monetary/nonmonetary method. 
E)  The noncurrent rate method.

Question 6

The translation adjustment from translating a foreign subsidiary's financial statements should be shown as

Accepted Answer

A)  an asset or liability (depending on the balance) in the consolidated balance sheet. 
B)  a revenue or expense (depending on the balance) in the consolidated income statement. 
C)  a component of stockholders' equity in the consolidated balance sheet. 
D)  a component of cash flows from financing activities in the consolidated statement of cash flows. 
E)  an element of the notes which accompany the consolidated financial statements. 
A)  an asset or liability (depending on the balance) in the consolidated balance sheet. 
B)  a revenue or expense (depending on the balance) in the consolidated income statement. 
C)  a component of stockholders' equity in the consolidated balance sheet. 
D)  a component of cash flows from financing activities in the consolidated statement of cash flows. 
E)  an element of the notes which accompany the consolidated financial statements.

Question 7

A highly inflationary economy is defined as

Accepted Answer

A)  Cumulative 5-year inflation in excess of 100%. 
B)  Cumulative 3-year inflation in excess of 100%. 
C)  Cumulative 5-year inflation in excess of 90%. 
D)  Cumulative 3-year inflation in excess of 90%. 
E)  Any country designated as a company operating in a third-world economy. 
A)  Cumulative 5-year inflation in excess of 100%. 
B)  Cumulative 3-year inflation in excess of 100%. 
C)  Cumulative 5-year inflation in excess of 90%. 
D)  Cumulative 3-year inflation in excess of 90%. 
E)  Any country designated as a company operating in a third-world economy.

Question 8

A historical exchange rate for common stock of a foreign subsidiary is best described as

Accepted Answer

A)  The rate at date of the acquisition business combination. 
B)  The rate when the common stock was originally issued for the acquisition transaction. 
C)  The average rate from date of acquisition to the date of the balance sheet. 
D)  The rate from the prior year's balances. 
E)  The January 1 exchange rate. 
A)  The rate at date of the acquisition business combination. 
B)  The rate when the common stock was originally issued for the acquisition transaction. 
C)  The average rate from date of acquisition to the date of the balance sheet. 
D)  The rate from the prior year's balances. 
E)  The January 1 exchange rate.

Question 9

How can a parent corporation determine the functional currency for a foreign subsidiary that conducts business in more than one country?

Accepted Answer

If the foreign subsidiary has distinct a

Question 10

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2011, have been restated into U.S. dollars as follows:  
-Assuming the functional currency of the subsidiary is the local currency, what total should be included in Parker's consolidated balance sheet at December 31, 2011, for the above items?

Accepted Answer

A)  $407,500. 
B)  $418,000. 
C)  $396,000. 
D)  $403,500. 
E)  $398,500. 
A)  $407,500. 
B)  $418,000. 
C)  $396,000. 
D)  $403,500. 
E)  $398,500.

Question 11

Esposito is an Italian subsidiary of a U.S. company.
Esposito's ending inventory is valued at the average cost for the last quarter of the year.
The following account balances are available for Esposito for 2011: $$\begin{array}{l}
\begin{array} { l l r } 
\text { Beginning inventory } & € 20,000 \
\text { Purchases } & € { 400,000 } \
\text { Ending inventory } & € 15,000
\end{array}\
\text { Relevant exchange rates follow: }\
\begin{array} { l r } 
4 {^ \text {th }  { \text {quarter average, } } 2010 } & \$ 93 = € 1 \
\text { December } 31,2010 & .94 = € 1 \
\text { Average 2011 } & .96 = € 1 \
4  {^ \text {th }  { \text {quarter average, } } 2011 } & .99 = € 1 \
\text { December 31, 2011 } & 1.01 = € 1
\end{array}
\end{array}$$
-Compute the cost of goods sold for 2011 in U.S. dollars using the current rate method.

Accepted Answer

A)  $376,550. 
B)  $387,750. 
C)  $388,800. 
D)  $400,950. 
E)  $409,050. 
A)  $376,550. 
B)  $387,750. 
C)  $388,800. 
D)  $400,950. 
E)  $409,050.

Question 12

A foreign subsidiary uses the first-in first-out inventory method. The following inventory balances are given at December 31, 2011 in local currency units (LCU): $\begin{array}{ll}
\text { Inventory at cost } & 320,000 \mathrm{LCU} \
\text { Inventory at replacement cost } & 300,000 \
\text { Inventory at net realizable value } & 420,000 \
\text { Inventory at net realizable value } &\
\text { less normal profit margin }&400,000
\end{array}$
$\text { The following exchange rates are given for } 2011$
$\begin{array} { l  }
 \text { $ 4^{\text {th }} $ quarter average, 2011} &\$ 1.43=1 \mathrm{LCU}\
 \text { December 31.2011}&1.42=1 \mathrm{LCU}\
\end{array}$

-Compute the December 31, 2011, inventory balance using the current rate method.

Accepted Answer

A)  $454,400. 
B)  $457,600. 
C)  $596,400. 
D)  $568,000. 
E)  $426,000. 
A)  $454,400. 
B)  $457,600. 
C)  $596,400. 
D)  $568,000. 
E)  $426,000.

Question 13

Quadros Inc., a Portugese firm was acquired by a U.S. company on January 1, 2010. Selected account balances are available for the year ended December 31, 2011, and are stated in euro, the local currency.  
-Assume the functional currency is the euro, compute the U.S. balance sheet amount for accumulated depreciation for 2011.

Accepted Answer

A)  $40,950. 
B)  $41,850. 
C)  $45,450. 
D)  $42,750. 
E)  $44,100. 
A)  $40,950. 
B)  $41,850. 
C)  $45,450. 
D)  $42,750. 
E)  $44,100.

Question 14

Under the temporal method, how would cost of goods sold be remeasured?

Accepted Answer

A)  Beginning of the year rate. 
B)  Average rate. 
C)  Current rate. 
D)  Historical rate. 
E)  Composite amount. 
A)  Beginning of the year rate. 
B)  Average rate. 
C)  Current rate. 
D)  Historical rate. 
E)  Composite amount.

Question 15

Ginvold Co. began operating a subsidiary in a foreign country on January 1, 2011 by acquiring all of the common stock for §50,000. This subsidiary immediately borrowed §120,000 on a five-year note with ten percent interest payable annually beginning on January 1, 2012. A building was then purchased for §170,000 on January 1, 2011. This property had a ten-year anticipated life and no salvage value and was to be depreciated using the straight-line method. The building was immediately rented for three years to a group of local doctors for §6,000 per month. By year-end, payments totaling §60,000 had been received. On October 1, §5,000 were paid for a repair made on that date and it was the only transaction of this kind for the year. A cash dividend of §6,000 was transferred back to Ginvold on December 31, 2011. The functional currency for the subsidiary was the stickle. Currency exchange rates were as follows: $\begin{array}{ll}
\text { January } 1,2011 & \S 1=\$ 2.40 \
\text { October } 1,2011 & \S 1=\$ 2.22 \
\text { Average for } 2011 & \S 1=\$ 2.28 \
\text { December } 31,2011 & \S 1=\$ 2.16
\end{array}$
-Prepare a statement of cash flows for this subsidiary in stickles and then translate the amounts into U.S. dollars.

Accepted Answer

Ginvold Co. Subsidia

Question 16

When preparing a consolidating statement of cash flows, which of the following statements is false?

Accepted Answer

A)  All operating activity items are translated at an average exchange rate for the period. 
B)  A change in accounts receivable is translated using the current rate. 
C)  A change in long-term debt is translated using the historical rate at the date of the change. 
D)  Dividends paid are translated using the historical rate at the date of the payment. 
E)  All items follow translation rates used for the balance sheet and the income statement. 
A)  All operating activity items are translated at an average exchange rate for the period. 
B)  A change in accounts receivable is translated using the current rate. 
C)  A change in long-term debt is translated using the historical rate at the date of the change. 
D)  Dividends paid are translated using the historical rate at the date of the payment. 
E)  All items follow translation rates used for the balance sheet and the income statement.

Question 17

Under the temporal method, inventory at market would be remeasured at what rate?

Accepted Answer

A)  Beginning of the year rate. 
B)  Average rate. 
C)  Current rate. 
D)  Historical rate. 
E)  Composite amount. 
A)  Beginning of the year rate. 
B)  Average rate. 
C)  Current rate. 
D)  Historical rate. 
E)  Composite amount.

Question 18

What exchange rate should be used to translate (a) revenues and expenses that occur throughout the year and (b) a gain or loss that occurs on a specific day?

Accepted Answer

Revenues and expenses occurring througho

Question 19

A foreign subsidiary of a U.S. corporation purchased equipment on January 4, 2008.
(A) How would depreciation expense on the equipment be translated for 2011?
(B) How would depreciation expense on the equipment be remeasured for 2011?

Accepted Answer

(A.) Depreciation expense would be trans

Question 20

A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2011: $\begin{array}{lr}
\text { Cost of goods sold } & \S 12,000,000 \
\text { Ending inventory } & 600,000 \
\text { Beginning inventory } & 240,000
\end{array}$
The average exchange rate during 2011 was §1 = $.96. The beginning inventory was acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired when the exchange rate was §1 = $.90. The exchange rate at December 31, 2011 was §1 = $.84. At what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2011 U.S. dollar income statement?

Accepted Answer

A)  $11,253,600. 
B)  $11,577,600. 
C)  $11,520,000. 
D)  $11,613,600. 
E)  $11,523,600. 
A)  $11,253,600. 
B)  $11,577,600. 
C)  $11,520,000. 
D)  $11,613,600. 
E)  $11,523,600.

Under the current rate method, how would cost of goods sold be translated?

When consolidating a foreign subsidiary, which of the following statements is true?

Under the current rate method, retained earnings would be translated at what rate?

Under the current rate method, common stock would be translated at what rate?

According to U.S. GAAP for a local currency perspective, which method is usually required for translating a foreign subsidiary's financial statements into the parent's reporting currency?

The translation adjustment from translating a foreign subsidiary's financial statements should be shown as

A highly inflationary economy is defined as

A historical exchange rate for common stock of a foreign subsidiary is best described as

How can a parent corporation determine the functional currency for a foreign subsidiary that conducts business in more than one country?

Under the temporal method, how would cost of goods sold be remeasured?

When preparing a consolidating statement of cash flows, which of the following statements is false?

Under the temporal method, inventory at market would be remeasured at what rate?

What exchange rate should be used to translate (a) revenues and expenses that occur throughout the year and (b) a gain or loss that occurs on a specific day?

A foreign subsidiary of a U.S. corporation purchased equipment on January 4, 2008. (A) How would depreciation expense on the equipment be translated for 2011? (B) How would depreciation expense on the equipment be remeasured for 2011?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidations-Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements - Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flo

Consolidated Financial Statements - Ownership Patterns and Income

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Worldwide Accounting Diversity and International Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operations

Partnerships: Termination and Liquidation

Accounting for State and Local Governments

Accounting for State and Local Governments

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters

Exam 10: Translation of Foreign Currency Financial Statements

Under the current rate method, how would cost of goods sold be translated?

When consolidating a foreign subsidiary, which of the following statements is true?

Under the current rate method, retained earnings would be translated at what rate?

Under the current rate method, common stock would be translated at what rate?

According to U.S. GAAP for a local currency perspective, which method is usually required for translating a foreign subsidiary's financial statements into the parent's reporting currency?

The translation adjustment from translating a foreign subsidiary's financial statements should be shown as

A highly inflationary economy is defined as

A historical exchange rate for common stock of a foreign subsidiary is best described as

How can a parent corporation determine the functional currency for a foreign subsidiary that conducts business in more than one country?

Under the temporal method, how would cost of goods sold be remeasured?

When preparing a consolidating statement of cash flows, which of the following statements is false?

Under the temporal method, inventory at market would be remeasured at what rate?

What exchange rate should be used to translate (a) revenues and expenses that occur throughout the year and (b) a gain or loss that occurs on a specific day?

A foreign subsidiary of a U.S. corporation purchased equipment on January 4, 2008. (A) How would depreciation expense on the equipment be translated for 2011? (B) How would depreciation expense on the equipment be remeasured for 2011?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidations-Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements - Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flo

Consolidated Financial Statements - Ownership Patterns and Income

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Worldwide Accounting Diversity and International Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operations

Partnerships: Termination and Liquidation

Accounting for State and Local Governments

Accounting for State and Local Governments

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters