Question 1

Under FAS 52, "remeasurement" is going from the reporting currency to the functional currency.

Accepted Answer

A) True 
 B)False  False

Question 2

_____ The mixing of valuation bases (foreign fixed assets and domestic fixed assets) occurs

Accepted Answer

A)  Only under the current rate method. 
B)  Only under the temporal method. 
C)  Only under the PPP current-value approach. 
D)  Under the current rate method, the temporal method, and the PPP current-value approach. 
E)  None of the above. 
A)  Only under the current rate method. 
B)  Only under the temporal method. 
C)  Only under the PPP current-value approach. 
D)  Under the current rate method, the temporal method, and the PPP current-value approach. 
E)  None of the above. D

Question 3

The translation methods that fit under the U.S. dollar unit of measure are the ________________________________ method, the _________________________________ method, and the _____________________________________ method.

Accepted Answer

temporal, monetary-nonmonetary, current-noncurrent

Question 4

_____ On 1/1/06, the direct exchange rate was $.60. On 12/31/06, the direct exchange rate was $.39. During 2001, the United States had 6% inflation, and the foreign country had 20% inflation. How much of the change in the exchange rate was the result of domestic inflation?

Accepted Answer

A)  $.10 
B)  $(.10) 
C)  $.03 
D)  $(.03) 
E)  $(.14) 
A)  $.10 
B)  $(.10) 
C)  $.03 
D)  $(.03) 
E)  $(.14)

Question 5

A factor pointing toward the use of the foreign currency as the functional currency is a significant level of intercompany inventory transfers.

Accepted Answer

A) True 
 B)False

Question 6

_____ Which of the following statements does not hold true for the U.S. dollar unit of measure approach?

Accepted Answer

A)  The relationships of items in the foreign currency financial statements are maintained in expressing the accounts in U.S. dollars. 
B)  It completely disregards how changes in the exchange rate affect the nonmonetary accounts. 
C)  A distinction is made between monetary and nonmonetary items. 
D)  For fixed assets, the amounts expressed in U.S. dollars are the U.S. dollar equivalents of the transactions at the time the transactions occurred. 
E)  None of the above. 
A)  The relationships of items in the foreign currency financial statements are maintained in expressing the accounts in U.S. dollars. 
B)  It completely disregards how changes in the exchange rate affect the nonmonetary accounts. 
C)  A distinction is made between monetary and nonmonetary items. 
D)  For fixed assets, the amounts expressed in U.S. dollars are the U.S. dollar equivalents of the transactions at the time the transactions occurred. 
E)  None of the above.

Question 7

A factor pointing toward the use of the foreign currency as the functional currency is the foreign unit selling its products locally rather than in the United States.

Accepted Answer

A) True 
 B)False

Question 8

Under FAS 52, the effect of an exchange rate change is reported in Other Comprehensive Income when the temporal method is used.

Accepted Answer

A) True 
 B)False

Question 9

Under FAS 52, the effect of an exchange rate change is referred to as a translation adjustment only if the foreign currency is the functional currency.

Accepted Answer

A) True 
 B)False

Question 10

_____ Under the temporal method, what is the effect of an increase in the direct exchange rate under each of the following situations?

Accepted Answer

The answer of _____ Under the temporal method, what is...

Question 11

_____ Which exchange rates are used to express the following accounts in dollars under the temporal method of translation?

Accepted Answer

The answer of _____ Which exchange rates are used to...

Question 12

_____ Under APB Opinion No. 23, parent companies must provide income taxes on earnings of their foreign subsidiaries in a manner most analogous to

Accepted Answer

A)  The cash basis. 
B)  The accrual basis. 
C)  A partial accrual basis. 
D)  The equity method. 
E)  The cost method. 
A)  The cash basis. 
B)  The accrual basis. 
C)  A partial accrual basis. 
D)  The equity method. 
E)  The cost method.

Question 13

_____ On 12/31/06, Polex's payable to a foreign vendor was properly reported at $512,000 in its balance sheet after recording a $12,000 upward adjustment as a result of a change in the exchange rate. On 1/7/07, the settlement required $505,000. Also, Polex owns a foreign subsidiary. For 2006, an adverse result of $50,000 occurred in translation or remeasurement (as appropriate) for this subsidiary. What amount should be reported in the 2006 consolidated income statement under each of the following situations?

Accepted Answer

The answer of _____ On 12/31/06, Polex's payable to a...

Question 14

The current rate method properly reports the economic effect of noninflationary factors.

Accepted Answer

A) True 
 B)False

Question 15

Under FAS 52, "translation" is the process of going from the functional currency into the reporting currency.

Accepted Answer

A) True 
 B)False

Question 16

When a foreign subsidiary has the U.S. dollar as its functional currency, the parent would hedge the ____________________________________________ to prevent reporting an adverse impact on stockholders' equity as a result of an adverse exchange rate change.

Accepted Answer

The answer of When a foreign subsidiary has the U.S....

Question 17

Dividend withholding taxes are a tax to the ___________________________________.

Accepted Answer

The answer of Dividend withholding taxes are a tax to...

Question 18

To satisfy the "invested indefinitely" condition of APB Opinion No. 23, the subsidiary cannot pay any dividends.

Accepted Answer

A) True 
 B)False

Question 19

Using the following answer code, select the proper letter(s) and insert it (them) in the space provided:
   a. _____ _____ The two things in APB Opinion No. 23 that allow the nonprovision for taxes on the net income of subsidiaries.
b. _____ _____ The category of subsidiary to which the 100% dividend received deduction is applicable.
c. _____ _____ The two examples of evidence required to satisfy the conditions for indefinite investment.
d. _____ _____ On whose books are dividend withholding taxes recorded?
e. _____ _____ The type of subsidiary with which a domestic parent can file a consolidated income tax return. (This does not pertain to ownership percentage; the answer is not T.)
f. _____ _____ Something that is applicable only to foreign subsidiaries.

Accepted Answer

The answer of Using the following answer code, select the...

Question 20

FAS 8 used a(n) __________________________________________ unit of measure, which was the _______________________________.

Accepted Answer

The answer of FAS 8 used a(n) __________________________________________ unit of...

Exam 16: Translating Foreign Currency Statements: The Temporal Method and the Functional Currency Concept

Under FAS 52, "remeasurement" is going from the reporting currency to the functional currency.

_____ The mixing of valuation bases (foreign fixed assets and domestic fixed assets) occurs

The translation methods that fit under the U.S. dollar unit of measure are the ________________________________ method, the _________________________________ method, and the _____________________________________ method.

_____ On 1/1/06, the direct exchange rate was $.60. On 12/31/06, the direct exchange rate was $.39. During 2001, the United States had 6% inflation, and the foreign country had 20% inflation. How much of the change in the exchange rate was the result of domestic inflation?

A factor pointing toward the use of the foreign currency as the functional currency is a significant level of intercompany inventory transfers.

_____ Which of the following statements does not hold true for the U.S. dollar unit of measure approach?

A factor pointing toward the use of the foreign currency as the functional currency is the foreign unit selling its products locally rather than in the United States.

Under FAS 52, the effect of an exchange rate change is reported in Other Comprehensive Income when the temporal method is used.

Under FAS 52, the effect of an exchange rate change is referred to as a translation adjustment only if the foreign currency is the functional currency.

_____ Under the temporal method, what is the effect of an increase in the direct exchange rate under each of the following situations?

_____ Which exchange rates are used to express the following accounts in dollars under the temporal method of translation?

_____ Under APB Opinion No. 23, parent companies must provide income taxes on earnings of their foreign subsidiaries in a manner most analogous to

The current rate method properly reports the economic effect of noninflationary factors.

Under FAS 52, "translation" is the process of going from the functional currency into the reporting currency.

When a foreign subsidiary has the U.S. dollar as its functional currency, the parent would hedge the ____________________________________________ to prevent reporting an adverse impact on stockholders' equity as a result of an adverse exchange rate change.

Dividend withholding taxes are a tax to the ___________________________________.

To satisfy the "invested indefinitely" condition of APB Opinion No. 23, the subsidiary cannot pay any dividends.

FAS 8 used a(n) __________________________________________ unit of measure, which was the _______________________________.

Wholly Owned Subsidiaries: at Date of Creation

Wholly Owned Subsidiaries: Postcreation Periods

Partially Owned Created Subsidiaries & Variable Interest Entities

Introduction to Business Combinations

The Purchase Method: at Date of Acquisition-100 Ownership

The Purchase Method: Postacquisition Periods and Partial Ownerships

New Basis of Accounting

Introduction to Intercompany Transactions

Intercompany Inventory Transfers

Intercompany Fixed Asset Transfers & Bond Holdings

Changes in a Parents Ownership Interest, Statement of Cash Flows, & Earnings Per Share

Reporting Segment and Related Information

International Accounting Standards & Translating Foreign Currency Transactions

Using Derivatives to Manage Foreign Currency Exposures

Translating Foreign Currency Statements: The Current Rate Method

Interim Period Reporting

Securities and Exchange Commission Reporting

Bankruptcy Reorganizations and Liquidations

Partnerships: Formation and Operation

Partnerships: Changes in Ownership

Partnerships: Liquidations

Estates and Trusts

Governmental Accounting: Basic Principles and the General Fund

Governmental Accounting: The Special-Purpose Funds and Special General Ledger

Not-For-Profit Organizations: Introduction and Private Npos

Filters

The translation methods that fit under the U.S. dollar unit of measure are the ________________ method, the _ method, and the _____________________ method.

FAS 8 used a(n) ____________ unit of measure, which was the _.