Acct 413 Exam Ch. 8

Front 1

The theory of Translation adjustment

Back 1

Increases(decreases) to revalued assets from increases(decreases) to current exchange rates year to year also result in ting credits(debits) to the equity account.

Front 2

If a subsidiary has a net asset position at year end and the current exchange rate increases during the year this requires a

Back 2

credit(increase) to translation adjustment

Front 3

If a subsidiary has a net liability position at year end and the current exchange rate increases during the year this requires a

Back 3

debit (decrease) to translation adjustment

Front 4

If a subsidiary has a net asset position at year end and the current exchange rate decreases during the year this requires a

Back 4

debit (decrease) to translation adjustment

Front 5

If a subsidiary has a net liability position at year end and the current exchange rate decreases during the year this requires a

Back 5

credit(increase) to translation adjustment

Front 6

Assume the current rate method is used, a net asset balance sheet exposure exists during the year, and the foreign currency appreciates. Which of the following statements is true?

There is no translation adjustment this year.

There will be a translation loss recorded on the income statement for the year.

There will be a translation gain recorded on the income statement for the year.

There will be a negative translation adjustment (debit) in the equity section of the balance sheet as other comprehensive income.

There will be a positive translation adjustment (credit) to the equity section of the balance sheet as other comprehensive income.

Back 6

There will be a positive translation adjustment (credit) to the equity section of the balance sheet as other comprehensive income.

Front 7

What is a company's functional currency?

the currency of the primary economic environment in which it operates.

the currency of the country where it has its headquarters.

the currency in which it prepares its financial statements.

the reporting currency of its parent for a subsidiary.

the currency it chooses to designate as such.

Back 7

the currency of the primary economic environment in which it operates.

Front 8

In converting a foreign subsidiary's financial statements to U.S. dollars, which exchange rate does the current rate method require for the subsidiary's assets and liabilities?

the exchange rate in effect when each asset or liability was acquired.

the average exchange rate for the current year.

a calculated exchange rate based on market value.

the exchange rate in effect as of the date of the consolidated balance being prepared.

the exchange rate in effect at the start of the current year.

Back 8

the exchange rate in effect as of the date of the consolidated balance being prepared.

Front 9

A net translation adjustment from converting a foreign subsidiary's financial statements under the current rate method should be shown as

an asset or liability (depending on the balance) in the consolidated balance sheet.

a disclosure in the notes to the consolidated financial statements.

a separate component of other comprehensive income in stockholders' equity in the consolidated balance sheet.

a component of cash flows from financing activities in the consolidated statement of cash flows.

an item of gain or loss (depending on the balance) on the consolidated income statement.

Back 9

a separate component of other comprehensive income in stockholders' equity in the consolidated balance sheet.

Front 10

Westmore, Ltd. is a British subsidiary of a U.S. company. Westmore's functional currency is the pound sterling (≤). The following exchange rates were in effect during 2011:



Westmore reported sales of 1,500,000 pounds during 2011.

Jan.1 1=$1.6

June 30 1=$1.64

Dec. 31 1=$1.61

Weighted average 1=$1.59

What amount (rounded) would have been included for this subsidiary in calculating consolidated sales?

$2,415,000.

$2,400,000.

$2,385,000.

$943,396.

$931,677.

Back 10

$2,385,000.

Front 11

Westmore, Ltd. is a British subsidiary of a U.S. company. Westmore's functional currency is the pound sterling (≤). The following exchange rates were in effect during 2011:

Jan.1 1=$1.6

June 30 1=$1.64

Dec. 31 1=$1.61

On December 31, 2011, Westmore had accounts receivable of 280,000 pounds. What amount (rounded) would have been included for this subsidiary in calculating consolidated accounts receivable?

$173,913.

$176,100.

$445,200.

$448,000.

$450,800.

Back 11

$450,800.

Front 12

A U.S. company's foreign subsidiary had the following amounts in stickles (§) in 2011:

Beginning inventory240,000 stickles Purchases12,360,000 stickles Ending inventory600,000 stickles Cost of goods sold
12,000,000 stickles
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.

Assuming that the functional currency of the foreign subsidiary was the stickle , at what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2011 U.S. dollar income statement?

$11,520,000.

$11,577,600.

$11,649,600.

$11,613,600.

$11,523,600.

Back 12

11,520,000.

Front 13

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

Beginning of the year rate.

Average rate for the year.

Current rate.

Historical rate (i.e. the date control was first established).

Composite amount at different historical rates.

Back 13

Composite amount at different historical rates.

Front 14

Under the current rate method which items on the balance sheet are translated using the current rate

Back 14

all assets and liabilities

Front 15

Under the current rate method which items on the balance sheet are translated using the historical rate

Back 15

Common and preferred stock, APIC (equity), and dividends

Front 16

Under the current rate method which items on the balance sheet are translated using the average rate

Back 16

all income statement items:

revenue

most monthly cash expenses

COGS

Depreciation expense

Amortization Exp. on intangibles

Expenses from expiring periods

Front 17

Under the Temporal method which items on the balance sheet are translated using the current rate

Back 17

Cash

recievables

Accounts payable

other accrued liabilities

Long term liabilities

Front 18

Under the Temporal method which items on the balance sheet are translated using the Historical rate

Back 18

All assets other than Cash & recievables

Unearned revenue

Common and preferred stock

APIC (equity)

Dividends

COGS

Depr. Exp.

Amort. Exp. on intangibles

Exp. from expiring periods

Front 19

Under the Temporal method which items on the balance sheet are translated using the Average rate

Back 19

Revenue

Most monthly cash expenses

Front 20

Define Monetary assets and monetary liabilities

Back 20

intrinsic value derives directly and completely from the value of the currency itself

Front 21

Examples of monetary assets and monetary liabilties

Back 21

cash

accts rec

notes rec

accts pyble

long-term debt

Front 22

define Non monetary assets and liabilities

Back 22

intrinsic values derived from internal properties of the item and not directly from the currency itself.

Front 23

examples of Non monetary assets and liabilities

Back 23

supplies

inventory at cost

land

buildings

equipment

intangible assets

unearned revenue

Front 24

Under temporal method only montary assets and monetary liabilities are translated at ....... .... ..... atyear end. Nonmonetary assets and liabilities are translated at ... .... ... Common stock and APIC(equity( are translated at ... ... ....

Back 24

current exchange rates

Historical exchange rate

Historical exchange rate