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general business data bank

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Question;10.4 Translation Exposure;1) Translation;exposure may also be called ________ exposure.;A) transaction;B) operating;C) accounting;D) currency;2);exposure is the potential for an increase or decrease in the parent company's;net worth and reported net income caused by a change in exchange rates since;the last transaction.;A) Transaction;B) Operating;C) Currency;D) Translation;3) Translation;exposure measures;A) changes in the;value of outstanding financial obligations incurred prior to a change in;exchange rates.;B) the potential;for an increase or decrease in the parent company's net worth and reported net;income caused by a change in exchange rates since the last consolidation of;international operations.;C) an unexpected;change in exchange rates impact on short run expected cash flows.;D) none of the;above.;4) According to;your authors, the main purpose of translation is;A) to prepare;consolidated financial statements.;B) to help;management assess the performance of foreign subsidiaries.;C) to act as an;interpreter for managers without foreign language skills.;D) none of the;above.;5) If the same;exchange rate were used to remeasure every line on a financial statement, then;there would be no imbalances from remeasuring.;6) Historical;exchange rates may be used for ________, while current exchange rates may be;used for ________.;A) fixed asses;and current assets, income and expense items;B) equity;accounts and fixed assets, current assets and liabilities;C) current assets;and liabilities, equity accounts and fixed assets;D) equity;accounts and current liabilities, current assets and fixed assets;7) A foreign;subsidiary's ________ currency is the currency used in the firm's day-to-day;operations.;A) local;B) integrated;C) notational;dollar;D) functional;8) The two basic;methods for the translation of foreign subsidiary financial statements are the;method and the ________ method.;A) current rate;temporal;B) temporal;proper timing;C) current rate;future rate;D) none of the;above;9) Exchange rate;imbalances that are passed through the balance sheet affect a firm's reported;income, but imbalances transferred to the income statement do not.;10) The current;rate method is the most prevalent method today for the translation of financial;statements.;11) The temporal;rate method is the most prevalent method today for the translation of financial;statements.;12) Gains or;losses caused by translation adjustments when using the current rate method are;reported separately on the ________.;A) consolidated;statement of cash flow;B) consolidated;income statement;C) consolidated;balance sheet;D) none of the;above;13) The biggest;advantage of the current rate method of reporting translation adjustments is;the fact that the gain or loss goes directly to the reserve account on the;consolidated balance sheet and does not pass through the consolidated income;statement.;14) Under the;current rate method, specific assets and liabilities are translated at exchange;rates consistent with the timing of the item's creation.;15) Under the;temporal rate method, specific assets and liabilities are translated at;exchange rates consistent with the timing of the item's creation.;16) The basic;advantage of the ________ method of foreign currency translation is that;foreign nonmonetary assets are carried at their original cost in the parent's;consolidated statement while the most important advantage of the;method is that the gain or loss from translation does not pass through the;income statement.;A) monetary;current rate;B) temporal;current rate;C) temporal;monetary;D) current rate;temporal;17) The current;rate method of foreign currency translation gains or losses resulting from;remeasurement are carried directly to current consolidated income and thus;introduces volatility to consolidated earnings.;18) The temporal;method of foreign currency translation gains or losses resulting from;remeasurement are carried directly to current consolidated income and thus;introduces volatility to consolidated earnings.

 

Paper#51219 | Written in 18-Jul-2015

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