Question 1

Under the temporal method,property,plant & equipment 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. D

Question 2

REFERENCE: 8-02
Darron Co.was formed on January 1,2018 as a wholly owned foreign subsidiary of a U.S.corporation.Darron's functional currency was the stickle (§).The following transactions and events occurred during 2018:
 $\begin{array}{ll}
\text { Jan. } 1 & \text { Darron issued common stock for } \$ 1,000,000 . \
\text { June } 30 & \text { Darron paid dividends of } \S 20,000 . \
\text { Dec. } 31 & \text { Darron reported net income of } \S 80,000 \text { for the year }\
\
\text { Exchange rates for } 2018 \text { were: }\
\text { Jan. } 1 & \$ 1=\S .48 \
\text { June } 30 & \$ 1=\S .46 \
\text { Dec. } 31 & \$ 1=\S .42 \
\text { Weighted average rate for the year } & \$ 1=\$ .44 
\end{array}$ 
-What exchange rate should have been used in translating Darron's revenues and expenses for 2018?

Accepted Answer

A) $1 = §.48. 
B) $1 = §.44. 
C) $1 = §.46. 
D) $1 = §.42. 
E) $1 = §.45. 
A) $1 = §.48. 
B) $1 = §.44. 
C) $1 = §.46. 
D) $1 = §.42. 
E) $1 = §.45. B

Question 3

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) A single historical rate. 
E) Historical rates. 
A) Beginning of the year rate. 
B) Average rate. 
C) Current rate. 
D) A single historical rate. 
E) Historical rates. E

Question 4

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 5

According to U.S.GAAP,when the local currency is the functional currency,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

A foreign subsidiary was acquired on January 1,2018.Determine the exchange rate used to restate the following accounts at December 31,2018.Land was purchased on October 1,2018.Relevant exchange dates follow:
(A)January 1,2018
(B)October 1,2018
(C)December 31,2018
(D)Average,2018
(E)Composite,using multiple dates.
Identify the exchange rate used to translate items 1-5 when the functional currency is the foreign currency:
____ 1.Land.
____ 2.Equipment.
____ 3.Bonds payable.
____ 4.Common stock.
____ 5.Retained earnings.
Identify the exchange rate used to remeasure the items 6-10 when the functional currency is the U.S.dollar:
____ 6.Land.
____ 7.Equipment.
____ 8.Bonds payable.
____ 9.Common stock.
____ 10.Retained earnings.

Accepted Answer

(1. )C; (2)C; (3. )C

Question 7

REFERENCE: 8-11
Quadros Inc. ,a Portuguese firm was acquired by a U.S.company on January 1,2017.Selected account balances are available for the year ended December 31,2018,and are stated in Euro,the local currency.
 $\begin{array}{lr}
\text { Sales } & £ 400,000 \
\text { Inventory (bought on February 1, 2018) } & 20,000 \
\text { Equipment (bought on January 1, 2017) } & 90,000 \
\text { Dividends (paid on September 1, 2018) } & 20,000 \
\text { Accumulated depreciation -Equipment 12/31/18 } & 45,000 \
\text { Depreciation expense - Equipment, 2018 } & 9,000
\end{array}$

$\text { Relevant exchange rates for } 1 \text { Euro are given below: }$

$\begin{array}{lr}
\text { January 1, 2017 } & \$ .91 \
\text { January 1, 2018 } & .93 \
\text { February 1, 2018 } & .94 \
\text { September 1, 2018 } & .97 \
\text { December 31, 2018 } & 1.01 \
\text { 4 th quarter average, 2017 } & .90 \
\text { 4 th quarter average, 2018 } & .98 \
\text { Average, 2018 } & .95
\end{array}$

-Assume the functional currency is the Euro;compute the U.S.balance sheet amount for accumulated depreciation for 2018.

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 8

On January 1,2018,Veldon Co. ,a U.S.corporation with the U.S.dollar as its functional currency,established Malont Co.as a subsidiary.Malont is located in the country of Sorania,and its functional currency is the stickle (§).Malont engaged in the following transactions during 2018:
 $\begin{array}{ll}
\text { January } 1,2018 & \text { Issued common stock for } \S 500,000 \
\text { July } 14,2018 & \text { Sold a patent at a gain of } \S 40,000 \
\text { October } 1,2018 & \text { Paid dividends of } \S 60,000
\end{array}$

Malont's operating revenues and expenses for 2018 were $\$ 800,000$ and $\$ 650,000$, respectively. The appropriate exchange rates were:

$\begin{array}{ll}
\text { January } 1,2018 & \S 1=\$ 2.5 \
\text { July } 14,2018 & \S 1=\$ 2.1 \
\text { October } 1,2018 & \S 1=\$ 2.6 \
\text { December } 31,2018 & \S 1=\$ 2.7 \
\text { Average for } 2018 & \S 1=\$ 2.4
\end{array}$ 
Required:
Calculate the translation adjustment for Malont.(Round your answers to the nearest whole dollar. )

Accepted Answer

The answer of On January 1,2018,Veldon Co. ,a U.S.corporation with...

Question 9

REFERENCE: 8-06
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 2018:
 $\begin{array} { l l } \text { Beginning inventory } & € 20,000 \ \text { Purchases } & € 400,000 \ \text { Ending inventory } & € 15,000 \end{array}$

Relevant exchange rates follow:

$\begin{array}{lr}
4^{\text {th }} \text { quarter average, } 2017 & \$ .93=€ 1 \
\text { December } 31,2017 & .94=€ 1 \
\text { Average for } 2018 & .96=€ 1 \
4^{\text {th }} \text { quarter average, } 2018 & .99=€ 1 \
\text { December 31, 2018 } & 1.01=€ 1
\end{array}$
-Compute ending inventory for 2018 under the temporal method.

Accepted Answer

A) $13,950. 
B) $14,100. 
C) $14,400. 
D) $14,850. 
E) $15,150. 
A) $13,950. 
B) $14,100. 
C) $14,400. 
D) $14,850. 
E) $15,150.

Question 10

What is the justification for the remeasurement of foreign currency transactions?

Accepted Answer

Remeasurement is needed for transactions

Question 11

What exchange rate would be used to translate the asset and liability account balances of a foreign subsidiary when the local currency is the functional currency? What justification can be given for using this exchange rate?

Accepted Answer

Assets and liabilities are translated us

Question 12

REFERENCE: 8-03
Dilty Corp.owned a subsidiary in France.Dilty concluded that the subsidiary's functional currency was the U.S.dollar.
-Which one of the following statements would justify this conclusion?

Accepted Answer

A) Most of the subsidiary's sales and purchases were with companies in the U.S. 
B) Dilty's functional currency is the dollar and Dilty is the parent. 
C) Dilty's other subsidiaries all had the dollar as their functional currency. 
D) Generally accepted accounting principles require that the subsidiary's functional currency must be the dollar if consolidated financial statements are to be prepared. 
E) Dilty is located in the U.S. 
A) Most of the subsidiary's sales and purchases were with companies in the U.S. 
B) Dilty's functional currency is the dollar and Dilty is the parent. 
C) Dilty's other subsidiaries all had the dollar as their functional currency. 
D) Generally accepted accounting principles require that the subsidiary's functional currency must be the dollar if consolidated financial statements are to be prepared. 
E) Dilty is located in the U.S.

Question 13

REFERENCE: 8-09
Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31,2018,have been restated into U.S.dollars as follows:
 $\begin{array}{lrr}
&\ { \text { Restated at } } \
& \text { Current Rates } & \text { Historical Rates } \
\text { Cash } & \$ 47,500 & \$ 45,000 \
\text { Accounts receivable } & 95,000 & 90,000 \
\text { Marketable securities, at fair value } & 76,000 & 72,000 \
\text { Land } & 57,000 & 54,000 \
\text { Equipment (net) } & 142,500 & 135,000 \
\quad \text { Total } & \$ 418,000 & \$ 396,000
\end{array}$

-Assuming the functional currency of the subsidiary is the U.S.dollar,what total should be included in Parker's consolidated balance sheet at December 31,2018,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 14

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 15

For a foreign subsidiary that uses the U.S.dollar as its functional currency,what method is required to ready the financial statements for consolidation?

Accepted Answer

A) Current/Noncurrent Method. 
B) Monetary/Nonmonetary Method. 
C) Current Rate Method. 
D) Temporal Method. 
E) Indirect Method. 
A) Current/Noncurrent Method. 
B) Monetary/Nonmonetary Method. 
C) Current Rate Method. 
D) Temporal Method. 
E) Indirect Method.

Question 16

REFERENCE: 8-12
Ginvold Co.began operating a subsidiary in a foreign country on January 1,2018 by acquiring all of the common stock for §50,000 Stickles,the local currency.This subsidiary immediately borrowed §120,000 on a five-year note with ten percent interest payable annually beginning on January 1,2019.A building was then purchased for §170,000 on January 1,2018.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 31,2018.The functional currency for the subsidiary was the Stickle (§).Currency exchange rates were as follows:
 $\begin{array}{ll}
\text { January } 1,2018 & \S 1=\$ 2.40 \
\text { October } 1,2018 & \S 1=\$ 2.22 \
\text { Average for } 2018 & \S 1=\$ 2.28 \
\text { December } 31,2018 & \S 1=\$ 2.16 
\end{array}$

-Prepare a statement of cash flows for this subsidiary in stickles and then translate the amounts into U.S.dollars.

Accepted Answer

Ginvold Co.Subsidiar

Question 17

A net asset balance sheet exposure exists and the foreign currency appreciates.Which of the following statements is true?

Accepted Answer

A) There is no translation adjustment. 
B) There is a transaction loss. 
C) There is a transaction gain. 
D) There is a negative translation adjustment. 
E) There is a positive translation adjustment. 
A) There is no translation adjustment. 
B) There is a transaction loss. 
C) There is a transaction gain. 
D) There is a negative translation adjustment. 
E) There is a positive translation adjustment.

Question 18

REFERENCE: 8-03
Dilty Corp.owned a subsidiary in France.Dilty concluded that the subsidiary's functional currency was the U.S.dollar.
-What must Dilty do to ready the subsidiary's financial statements for consolidation?

Accepted Answer

A) First translate,then remeasure them. 
B) First remeasure,then translate them. 
C) State all of the subsidiary's accounts in U.S.dollars using the exchange rate in effect at the balance sheet date. 
D) Translate them. 
E) Remeasure them. 
A) First translate,then remeasure them. 
B) First remeasure,then translate them. 
C) State all of the subsidiary's accounts in U.S.dollars using the exchange rate in effect at the balance sheet date. 
D) Translate them. 
E) Remeasure them.

Question 19

On January 1,2018,Fandu Corp.began operations of a foreign subsidiary.On April 1,2018,the subsidiary purchased inventory costing 150,000 stickles.One-fourth of this inventory remained unsold at the end of 2018 while 40% of the liability from the purchase had not yet been paid.The pertinent indirect exchange rates were:
 $\begin{array}{ll}
\text { January } 1,2018 & \$  1=\S 3.0 \ 
\text { April 1, 2018 } & \$ 1=\S3.4 \
\text { Average for 2018 } & \$  1=\S 3.2 \
\text { December 31. } 2018 & \$ 1=\S 3.6
\end{array}$
 
Required:
What should have been the December 31,2018 inventory and accounts payable balances for this foreign subsidiary as translated into U.S.dollars? (Round your answers to the nearest whole dollar. )

Accepted Answer

Inventory

Question 20

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.

Under the temporal method,property,plant & equipment would be remeasured at what rate?

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

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

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

What is the justification for the remeasurement of foreign currency transactions?

What exchange rate would be used to translate the asset and liability account balances of a foreign subsidiary when the local currency is the functional currency? What justification can be given for using this exchange rate?

REFERENCE: 8-03 Dilty Corp.owned a subsidiary in France.Dilty concluded that the subsidiary's functional currency was the U.S.dollar. -Which one of the following statements would justify this conclusion?

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

For a foreign subsidiary that uses the U.S.dollar as its functional currency,what method is required to ready the financial statements for consolidation?

A net asset balance sheet exposure exists and the foreign currency appreciates.Which of the following statements is true?

REFERENCE: 8-03 Dilty Corp.owned a subsidiary in France.Dilty concluded that the subsidiary's functional currency was the U.S.dollar. -What must Dilty do to ready the subsidiary's financial statements for consolidation?

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

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 Flows, and Other Issues

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

Accounting for State and Local Governments, part I

Accounting for State and Local Governments, part II

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Exam 8: Translation of Foreign Currency Financial

Under the temporal method,property,plant & equipment would be remeasured at what rate?

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

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

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

What is the justification for the remeasurement of foreign currency transactions?

What exchange rate would be used to translate the asset and liability account balances of a foreign subsidiary when the local currency is the functional currency? What justification can be given for using this exchange rate?

REFERENCE: 8-03 Dilty Corp.owned a subsidiary in France.Dilty concluded that the subsidiary's functional currency was the U.S.dollar. -Which one of the following statements would justify this conclusion?

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

For a foreign subsidiary that uses the U.S.dollar as its functional currency,what method is required to ready the financial statements for consolidation?

A net asset balance sheet exposure exists and the foreign currency appreciates.Which of the following statements is true?

REFERENCE: 8-03 Dilty Corp.owned a subsidiary in France.Dilty concluded that the subsidiary's functional currency was the U.S.dollar. -What must Dilty do to ready the subsidiary's financial statements for consolidation?

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

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 Flows, and Other Issues

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

Accounting for State and Local Governments, part I

Accounting for State and Local Governments, part II

Filters