Question 1

Sunset Technological, Inc., a U.S. multinational producer of computer hardware, has subsidiaries located throughout the world. Sunset Technology purchased Werner Technology Company, a Swiss producer of computer hardware components, on January 1, 2010. Werner's financial statements are prepared and submitted in Swiss francs to Sunset's headquarters. Werner's adjusted trial balance at December 31, 2011, is presented below:
Werner Technology Company
Adjusted Trial Balance
December 31, 2011
(in Swiss Francs)
  
Relevant exchange rates for 2011 and 2010 are as follows:
  
The statement of retained earnings for the year ended December 31, 2010, is as follows (in U.S. dollars):
  
Required:
Prepare a translated statement of income and retained earnings, and a translated statement of financial position in U.S. dollars for Werner Technology for 2011.

Accepted Answer

The answer of Sunset Technological, Inc., a U.S. multinational producer...

Question 2

Complete the following statement by choosing the best response:
If the functional currency of a foreign subsidiary is the local currency of the country in which the foreign subsidiary operates, then

Accepted Answer

A)  the foreign subsidiary's financial statements are translated into U.S. dollars. 
B)  the foreign subsidiary's financial statements must be remeasured into U.S. dollars. 
C)  only the foreign subsidiary's assets and liabilities must be remeasured into U.S. dollars 
D)  only retained earnings must be remeasured into U.S. dollars.

Question 3

The SEC currently requires foreign companies that list shares on U.S. exchanges to provide

Accepted Answer

A)  both complete U.S. GAAP financial statements and a reconciliation of their reported income under non-U.S. GAAP to the reported income under U.S. GAAP. 
B)  only complete U.S. GAAP financial statements; the SEC will not accept under any circumstances only a reconciliation of an entity's reported income under non-U.S. GAAP to reported income under U.S. GAAP. 
C)  complete U.S. GAAP financial statements or a reconciliation of their reported income under non-U.S. GAAP to reported income under U.S. GAAP. 
D)  only a reconciliation of their reported income under non-U.S. GAAP to reported income under U.S. GAAP; the SEC will not accept under any circumstances only a complete set of U.S. GAAP financial statements.

Question 4

Which of the following statements is correct?

Accepted Answer

A)  Capital stock of a foreign subsidiary is translated at the historical rate, that is, the rate prevailing on the date the subsidiary was acquired. 
B)  Dividends are translated at the average exchange rate for the year. 
C)  Retained earnings are translated at the average exchange rate for the year. 
D)  Assets and liabilities are translated at the historical rate prevailing when the subsidiary was acquired.

Question 5

Maxim Importing Company. converts its foreign subsidiary financial statements using the translation process. The company's French subsidiary reported the following for 2011: revenues and expenses of 10,500,000 and 6,505,000 francs, respectively, earned or incurred evenly throughout the year, dividends of 500,000 francs were paid during the year. The following exchange rates are available:

Translated net income for 2011 is

Accepted Answer

A)  $733,950. 
B)  $805,860. 
C)  $838,950. 
D)  $910,860.

Question 6

Heiner Company. converts its foreign subsidiary financial statements using the translation process. The company's subsidiary in the Czech Republic reported the following for 2011: revenues and expenses of 25,000,000 and 18,500,000 koruna, respectively, earned or incurred evenly throughout the year, dividends of 1,500,000 koruna were paid during the year. The following exchange rates are available:

Translated net income for 2011 is

Accepted Answer

A)  $148,500. 
B)  $227,500. 
C)  $175,000. 
D)  $195,000.

Question 7

Under international accounting standards, cash paid for income taxes (associated with income tax expense) can be shown on the statement of cash flows as an

Accepted Answer

A)  operating activity only. 
B)  operating activity, or may be split between operating, investing, and financing activities depending on the nature of the transaction giving rise to the tax payment. 
C)  operating activity, or may be split between operating and investing activities depending on the transaction giving rise to the tax payment. 
D)  operating activity, or may be split between investing and financing activities depending on the transaction giving rise to the payment.

Question 8

Under international accounting standards, which of the following methods of inventory costing is not acceptable?

Accepted Answer

A)  Weighted-average 
B)  Moving-average 
C)  FIFO 
D)  LIFO

Question 9

The foreign currency translation adjustments amount is a(n)

Accepted Answer

A)  account in the parent company's general ledger. 
B)  account in the foreign subsidiary's general ledger. 
C)  balancing amount for translation. 
D)  balancing amount for remeasurement.

Question 10

Fleming Company. converts its foreign subsidiary financial statements using the translation process. The company's subsidiary in Denmark reported the following for 2011: revenues and expenses of 80,000 and 54,000 kroner, respectively, earned or incurred evenly throughout the year, dividends of 32,000 kroner were paid during the year. The following exchange rates are available:

Translated net income for 2011 is

Accepted Answer

A)  $70,200. 
B)  $78,000. 
C)  $(16,200). 
D)  $(8,400).

Question 11

Which of the following statements is correct?

Accepted Answer

A)  Capital stock of a foreign subsidiary is translated at the historical rate, that is, the rate prevailing on the date the subsidiary was acquired. 
B)  Dividends are translated at the average exchange rate for the year. 
C)  Retained earnings are translated at the average exchange rate for the year. 
D)  Assets and liabilities are translated at the historical rate prevailing when the subsidiary was acquired.

Question 12

Mankato, Inc., purchased Kyoto Manufacturing Company, a Japanese company, on January 4, 2011. On the date of purchase, the exchange rate for 1 Japanese yen was U.S. $0.007. The balance sheet for Kyoto Manufacturing Co.,on the date of purchase is shown below:
Kyoto Manufacturing Co.
Balance Sheet
January 4, 2011
(in Japanese yen)
  
Required:
Prepare a translated balance sheet as of January 4, 2011.

Accepted Answer

The answer of Mankato, Inc., purchased Kyoto Manufacturing Company, a...

Question 13

Which of the following is the current group within the International Accounting Standard Board organization that interprets existing standards or provides guidance in areas for which no accounting formal standard exists?

Accepted Answer

A)  Standing Interpretations Committee 
B)  International Accounting Standards Committee 
C)  Emerging Issues Task Force 
D)  International Financial Reporting Interpretations Committee

Question 14

Under international accounting standards, remote contingent liabilities are

Accepted Answer

A)  not disclosed. 
B)  not disclosed unless a guarantee arrangement (e. g., cosigning the loan of another party) exists. 
C)  disclosed if the amount of the contingent liability is reasonably estimable. 
D)  treated the same as reasonable possible contingencies.

Question 15

Which of the following statements regarding international accounting standards for the impairment of tangible assets is correct?

Accepted Answer

A)  Impairment losses cannot be subsequently reversed. 
B)  Impairment losses can be subsequently reversed to the extent of the amount of the initial impairment loss. 
C)  International accounting standards require a two-step test of impairment of a tangible asset. 
D)  Accounting for impairments is not necessary since entities are required under international accounting standards to adjust the values of property, plant, and equipment to fair value at the end of each reporting period for which reports are prepared.

Question 16

Under international accounting standards, revenue is recognized

Accepted Answer

A)  only when a sale and delivery have occurred. 
B)  upon the increase in the fair value of biological assets (e.g., cattle) without waiting for the assets to be sold. 
C)  upon the increase in the fair value of agricultural produce (e.g., harvested wheat) without waiting for the assets to be sold 
D)  upon the increase in the fair value of both biological assets (e.g., cattle) and agricultural produce (e.g., harvested wheat) without waiting for the assets to be sold.

Question 17

Albright Distributing Inc. converts its foreign subsidiary financial statements using the translation process. Their German subsidiary reported the following for 2011: revenues and expenses of 10,050,000 and 7,800,000 marks, respectively, earned or incurred evenly throughout the year, dividends of 2,000,000 marks were paid during the year. The following exchange rates are available:

Translated net income for 2011 is

Accepted Answer

A)  $641,250. 
B)  $607,500. 
C)  $131,250. 
D)  $97,500.

Question 18

European Trading Company. converts its foreign subsidiary financial statements using the translation process. The company's Swiss subsidiary reported the following for 2011: revenues and expenses of 14,119,000 and 7,985,000 Swiss francs, respectively, earned or incurred evenly throughout the year, dividends of 2,000,000 Swiss francs were paid during the year. The following exchange rates are available:

Translated net income for 2011 is

Accepted Answer

A)  $846,264. 
B)  $699,852. 
C)  $1,202,264. 
D)  $1,091,852.

Question 19

Which of the following statements is true regarding equity reserves?

Accepted Answer

A)  Under U.S. GAAP, Other Comprehensive Income represents an equity reserve. 
B)  Under U.S. GAAP, the allowance for doubtful accounts is considered an equity reserve. 
C)  Under U.S. GAAP, appropriations of retained earnings are considered an equity reserve. 
D)  Under U.S. GAAP, equity reserves are not currently allowed.

Question 20

Tokyo Enterprises, a subsidiary of Worldwide Enterprises based in Dallas, reported the following information at the end of its first year of operations (all in yen): assets--110,000,000; expenses--41,000,000; liabilities--97,500,000; capital stock--5,500,000; revenues--48,000,000. Relevant exchange rates are as follows:

As a result of the translation process, what amount is recorded on the financial statements as the translation adjustment?

Accepted Answer

A)  $21,000 debit adjustment 
B)  $76,000 debit adjustment 
C)  $21,000 credit adjustment 
D)  $76,000 credit adjustment

Exam 22: Accounting in a Global Market

Complete the following statement by choosing the best response: If the functional currency of a foreign subsidiary is the local currency of the country in which the foreign subsidiary operates, then

The SEC currently requires foreign companies that list shares on U.S. exchanges to provide

Which of the following statements is correct?

Under international accounting standards, cash paid for income taxes (associated with income tax expense) can be shown on the statement of cash flows as an

Under international accounting standards, which of the following methods of inventory costing is not acceptable?

The foreign currency translation adjustments amount is a(n)

Which of the following statements is correct?

Which of the following is the current group within the International Accounting Standard Board organization that interprets existing standards or provides guidance in areas for which no accounting formal standard exists?

Under international accounting standards, remote contingent liabilities are

Which of the following statements regarding international accounting standards for the impairment of tangible assets is correct?

Under international accounting standards, revenue is recognized

Which of the following statements is true regarding equity reserves?