Question 1

The process by which one currency is expressed or restated in terms of another is known as

Accepted Answer

A)  translation. 
B)  conversion. 
C)  mark-to-market. 
D)  inversion. 
A)  translation. 
B)  conversion. 
C)  mark-to-market. 
D)  inversion.

Question 2

The translation methodology that translates only owner's equity at historical exchange rates is the

Accepted Answer

A)  current-noncurrent method. 
B)  monetary-nonmonetary method. 
C)  temporal method. 
D)  current rate method. 
A)  current-noncurrent method. 
B)  monetary-nonmonetary method. 
C)  temporal method. 
D)  current rate method.

Question 3

According to which method is the translation gain or loss taken to the income statement?

Accepted Answer

A)  the current rate method 
B)  the consolidation method 
C)  the temporal method 
D)  the transcription method 
A)  the current rate method 
B)  the consolidation method 
C)  the temporal method 
D)  the transcription method

Question 4

IAS 21 and SFAS 52 are similar.

Accepted Answer

A) True 
 B)False

Question 5

Which foreign currency translation standard uses the following objective: "for the purpose of preparing an enterprise's financial statements, the objective of translation is to measure and express (a) in dollars and (b) in conformity with U.S. generally accepted accounting principles (GAAP) the assets, liabilities, revenues, or expenses that are measured or denominated in foreign currency."

Accepted Answer

A)  Accounting Research Study #12 
B)  FASB Statement 8 
C)  FASB Statement 52 
D)  International Accounting Standard 14. 
A)  Accounting Research Study #12 
B)  FASB Statement 8 
C)  FASB Statement 52 
D)  International Accounting Standard 14.

Question 6

Assume that Lewis International sells running shoes to a British importer on June 1 and that the sale is denominated at £75,000 and will be collected on July 15. Assume the treatment of FASB Statement 52 and that no forward contract is entered into. Also assume that Lewis closes its books at the end of each month. The following are the relevant exchange rates. 
$ \begin{array}{ll}\text { Spot rate on June 1 } & \$ 1.6200 \ \text { Forward rate for July } & \ 15 \text { delivery } & \$ 1.6000 \ \text { Spot rate on June 30 } & \$ 1.6100 \ \text { Spot rate on July 15 } & \$ 1.5950\end{array} $
-How much cash will Lewis receive on July 15?

Accepted Answer

A)  $120,750 
B)  $120,000 
C)  $119,625 
D)  $121,500 
A)  $120,750 
B)  $120,000 
C)  $119,625 
D)  $121,500

Question 7

The reporting currency is

Accepted Answer

A)  the currency in which the parent company prepares its financial statements. 
B)  any currency other than the parent currency. 
C)  the currency of the primary economic environment in which the firm operates. 
D)  the currency in the country where the foreign firm is operating. 
A)  the currency in which the parent company prepares its financial statements. 
B)  any currency other than the parent currency. 
C)  the currency of the primary economic environment in which the firm operates. 
D)  the currency in the country where the foreign firm is operating.

Question 8

The functional currency is the currency of the primary economic environment in which the company operates.

Accepted Answer

A) True 
 B)False

Question 9

In general, if the Japanese subsidiary of a U.S. company firm translates its financial statements according to the current rate method during a period when the value of the Japanese yen is falling against the reporting currency (the U.S. dollar) , the subsidiary will recognize a

Accepted Answer

A)  translation gain in the income statement. 
B)  translation loss in the income statement. 
C)  translation gain in the accumulated translation adjustment account in owners' equity. 
D)  translation loss in the accumulated translation adjustment account in owners' equity. 
A)  translation gain in the income statement. 
B)  translation loss in the income statement. 
C)  translation gain in the accumulated translation adjustment account in owners' equity. 
D)  translation loss in the accumulated translation adjustment account in owners' equity.

Question 10

Assume that U.S. parent company ABC has a subsidiary XYZ in Outer Mongolia. XYZ's total assets are as follows in Mongolian marks: $ \begin{array}{ll}\text { Cash and receivables } & 500,000 \ \text { Inventory } & 500,000 \ \text { Fixed assets (net) } & 900,000\end{array} $
The relevant exchange rates are:
OMM 1.6800 closing rate on the balance sheet date
OMM 1.5500 exchange rate when the fixed assets were acquired
OMM 1.6300 average exchange rate for the period
OMM 1.6600 average exchange rate when ending inventory was acquired.
What is the total value of assets if the functional currency is the Outer Mongolian mark?

Accepted Answer

A)  $1,130,952 
B)  $1,179,469 
C)  $1,175,883 
D)  $1,185,012 
A)  $1,130,952 
B)  $1,179,469 
C)  $1,175,883 
D)  $1,185,012

Question 11

Assume that Lewis International sells running shoes to a British importer on June 1 and that the sale is denominated at £75,000 and will be collected on July 15. Assume the treatment of FASB Statement 52 and that no forward contract is entered into. Also assume that Lewis closes its books at the end of each month. The following are the relevant exchange rates. 
$ \begin{array}{ll}\text { Spot rate on June 1 } & \$ 1.6200 \ \text { Forward rate for July } & \ 15 \text { delivery } & \$ 1.6000 \ \text { Spot rate on June 30 } & \$ 1.6100 \ \text { Spot rate on July 15 } & \$ 1.5950\end{array} $
-What is the amount of the foreign exchange gain or loss that it will recognize on June 30?

Accepted Answer

A)  $1500 loss 
B)  $ 750 loss 
C)  $1125 loss 
D)  $1875 loss 
E)  gain or loss is deferred 
A)  $1500 loss 
B)  $ 750 loss 
C)  $1125 loss 
D)  $1875 loss 
E)  gain or loss is deferred

Question 12

Assume that Lewis International sells running shoes to a British importer on June 1 and that the sale is denominated at £75,000 and will be collected on July 15. Assume the treatment of FASB Statement 52 and that no forward contract is entered into. Also assume that Lewis closes its books at the end of each month. The following are the relevant exchange rates. 
$ \begin{array}{ll}\text { Spot rate on June 1 } & \$ 1.6200 \ \text { Forward rate for July } & \ 15 \text { delivery } & \$ 1.6000 \ \text { Spot rate on June 30 } & \$ 1.6100 \ \text { Spot rate on July 15 } & \$ 1.5950\end{array} $
-What is the dollar value of the sale as carried on the books on June 30?

Accepted Answer

A)  $120,750 
B)  $120,000 
C)  $119,625 
D)  $121,500 
A)  $120,750 
B)  $120,000 
C)  $119,625 
D)  $121,500

Question 13

In general, if a foreign firm translates its financial statements according to the temporal method during a period when the value of the foreign currency is rising against the reporting currency, the firm will recognize a

Accepted Answer

A)  translation gain in the income statement. 
B)  translation loss in the income statement. 
C)  translation gain in the accumulated translation adjustment account in owners' equity. 
D)  translation loss in the accumulated translation adjustment account in owners' equity. 
A)  translation gain in the income statement. 
B)  translation loss in the income statement. 
C)  translation gain in the accumulated translation adjustment account in owners' equity. 
D)  translation loss in the accumulated translation adjustment account in owners' equity.

Question 14

According to the current-rate method of translating foreign currency financial statements,

Accepted Answer

A)  current assets and liabilities are translated at current exchange rates, and other assets, liabilities and owner's equity are translated at historical exchange rates. 
B)  only those assets carried at past exchange prices should be translated at the historical rate. 
C)  only owner's equity is translated at historical exchange rates. 
D)  translation losses are taken to income, but translation gains are deferred. 
A)  current assets and liabilities are translated at current exchange rates, and other assets, liabilities and owner's equity are translated at historical exchange rates. 
B)  only those assets carried at past exchange prices should be translated at the historical rate. 
C)  only owner's equity is translated at historical exchange rates. 
D)  translation losses are taken to income, but translation gains are deferred.

Question 15

Remeasurement does not require the temporal rate method.

Accepted Answer

A) True 
 B)False

Question 16

According to the temporal method of translating foreign currency financial statements,

Accepted Answer

A)  current assets and liabilities are translated at current exchange rates, and other assets, liabilities and owner's equity are translated at historical exchange rates. 
B)  only those assets carried at past exchange prices should be translated at the historical rate. 
C)  only owner's equity is translated at historical exchange rates. 
D)  the entire income statement should be at the current rate 
A)  current assets and liabilities are translated at current exchange rates, and other assets, liabilities and owner's equity are translated at historical exchange rates. 
B)  only those assets carried at past exchange prices should be translated at the historical rate. 
C)  only owner's equity is translated at historical exchange rates. 
D)  the entire income statement should be at the current rate

Question 17

In general, if the Japanese subsidiary of a U.S. company firm translates its financial statements according to the current rate method during a period when the value of the Japanese yen is rising against the reporting currency (the U.S. dollar) , the subsidiary will recognize a

Accepted Answer

A)  translation gain in the income statement. 
B)  translation loss in the income statement. 
C)  translation gain in the accumulated translation adjustment account in owners' equity. 
D)  translation loss in the accumulated translation adjustment account in owners' equity. 
A)  translation gain in the income statement. 
B)  translation loss in the income statement. 
C)  translation gain in the accumulated translation adjustment account in owners' equity. 
D)  translation loss in the accumulated translation adjustment account in owners' equity.

Question 18

According to which method is the foreign currency translation gain or loss taken to stockholders' equity?

Accepted Answer

A)  the current rate method 
B)  the consolidation method 
C)  the temporal method 
D)  the conversion method 
A)  the current rate method 
B)  the consolidation method 
C)  the temporal method 
D)  the conversion method

Question 19

According to FASB Statement No. 52,

Accepted Answer

A)  translation losses had to be recognized, whereas gains were deferred. 
B)  both the temporal and current rate methods were permitted. 
C)  the choice of translation methodology is independent of the choice of functional currency. 
D)  the temporal method is the only translation method allowed. 
A)  translation losses had to be recognized, whereas gains were deferred. 
B)  both the temporal and current rate methods were permitted. 
C)  the choice of translation methodology is independent of the choice of functional currency. 
D)  the temporal method is the only translation method allowed.

Question 20

Assume that U.S. parent company ABC has a subsidiary XYZ in Outer Mongolia. XYZ's total assets are as follows in Mongolian marks:

$ \begin{array}{ll}\text { Cash and receivables } & 500,000 \ \text { Inventory } & 500,000 \ \text { Fixed assets (net) } & 900,000\end{array} $
The relevant exchange rates are:
OMM 1.6800 closing rate on the balance sheet date
OMM 1.5500 exchange rate when the fixed assets were acquired
OMM 1.6300 average exchange rate for the period
OMM 1.6600 average exchange rate when ending inventory was acquired.
What is the total value of assets if the functional currency is the U.S. dollar?

Accepted Answer

A)  $1,130,952 
B)  $1,179,469 
C)  $1,175,883 
D)  $1,185,012 
A)  $1,130,952 
B)  $1,179,469 
C)  $1,175,883 
D)  $1,185,012

The process by which one currency is expressed or restated in terms of another is known as

The translation methodology that translates only owner's equity at historical exchange rates is the

According to which method is the translation gain or loss taken to the income statement?

IAS 21 and SFAS 52 are similar.

The reporting currency is

The functional currency is the currency of the primary economic environment in which the company operates.

In general, if the Japanese subsidiary of a U.S. company firm translates its financial statements according to the current rate method during a period when the value of the Japanese yen is falling against the reporting currency (the U.S. dollar) , the subsidiary will recognize a

In general, if a foreign firm translates its financial statements according to the temporal method during a period when the value of the foreign currency is rising against the reporting currency, the firm will recognize a

According to the current-rate method of translating foreign currency financial statements,

Remeasurement does not require the temporal rate method.

According to the temporal method of translating foreign currency financial statements,

In general, if the Japanese subsidiary of a U.S. company firm translates its financial statements according to the current rate method during a period when the value of the Japanese yen is rising against the reporting currency (the U.S. dollar) , the subsidiary will recognize a

According to which method is the foreign currency translation gain or loss taken to stockholders' equity?

According to FASB Statement No. 52,

International Accounting and International Business

International Accounting Patterns, Culture and Development

Comparative International Financial Accounting I

Comparative International Financial Accounting II

International Financial Statement Analysis

International Transparency and Disclosure

International Accounting Standards and Global Convergence

International Business Combinations, Goodwill and Intangibles

International Segment Reporting

International Accounting for Price Changes

Corporate Governance and Control of Global Operations

Foreign Exchange Risk Management

International Budgeting and Performance Evaluation

International Auditing Issues

International Taxation Issues

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Exam 10: Foreign Currency Transactions and Translation

The process by which one currency is expressed or restated in terms of another is known as

The translation methodology that translates only owner's equity at historical exchange rates is the

According to which method is the translation gain or loss taken to the income statement?

IAS 21 and SFAS 52 are similar.

The reporting currency is

The functional currency is the currency of the primary economic environment in which the company operates.

In general, if the Japanese subsidiary of a U.S. company firm translates its financial statements according to the current rate method during a period when the value of the Japanese yen is falling against the reporting currency (the U.S. dollar) , the subsidiary will recognize a

In general, if a foreign firm translates its financial statements according to the temporal method during a period when the value of the foreign currency is rising against the reporting currency, the firm will recognize a

According to the current-rate method of translating foreign currency financial statements,

Remeasurement does not require the temporal rate method.

According to the temporal method of translating foreign currency financial statements,

In general, if the Japanese subsidiary of a U.S. company firm translates its financial statements according to the current rate method during a period when the value of the Japanese yen is rising against the reporting currency (the U.S. dollar) , the subsidiary will recognize a

According to which method is the foreign currency translation gain or loss taken to stockholders' equity?

According to FASB Statement No. 52,

International Accounting and International Business

International Accounting Patterns, Culture and Development

Comparative International Financial Accounting I

Comparative International Financial Accounting II

International Financial Statement Analysis

International Transparency and Disclosure

International Accounting Standards and Global Convergence

International Business Combinations, Goodwill and Intangibles

International Segment Reporting

International Accounting for Price Changes

Corporate Governance and Control of Global Operations

Foreign Exchange Risk Management

International Budgeting and Performance Evaluation

International Auditing Issues

International Taxation Issues

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