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1. Which of the following methods for translating...

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1. Which of the following methods for translating foreign currency financial statements attempts to produce consolidated financial statements as if a subsidiary had actually used the parent company's currency for all its transactions? A) Current/Noncurrent method B) Monetary/Nonmonetary method C) Current rate method D) Temporal method 2. Essco Ltd, a foreign subsidiary of Peako Corp., has written down its inventory to current market value under a ?lower of cost or market? rule. When consolidating Essco's balance sheet into Peako's balance sheet, what exchange rate should be used for the inventory under the temporal method? A) historical rate B) current rate C) average rate D) cannot be determined with the information given 3. Under the temporal method of consolidating foreign currency financial statements, what exchange rate should be used for translating the depreciation expense recorded by a subsidiary? A) average rate B) current rate C) historical rate D) forward rate 4. Under both the temporal method and the current rate method, what exchange rate should be used to translate a foreign subsidiary's dividends into parent company currency? A) current rate B) historical rate C) average rate D) Any of the above methods may be used under both the temporal and current method. 5. Under the current rate method of translating foreign currency financial statements, what exchange rate should be used for cost of goods sold? A) spot rate at the end of the year B) average rate during the year C) spot rate mid-year D) There is no single rate because beginning and ending inventory must be converted at different exchange rates than purchases. 6. International accounting standards define functional currency as: A) the currency of the parent company. B) the currency of the primary economic environment in which the subsidiary operates. C) the currency of the primary economic environment in which the parent operates. D) the currency used by a subsidiary for its financial reporting. 7. What is EDGAR? A) It is a database provided by the London, England stock exchange that provides financial statement information on U.K. companies. B) It is a database created by the U.S. Securities and Exchange Commission that provides reports of all corporations listed on the U.S. stock exchanges. C) It is a database of reports filed electronically with the U.S. Securities and Exchange Commission. D) It is a database that links users to U.S. company websites much like CAROL does in the U.K. 8. What language will be used for the quarterly reports submitted by foreign companies to the U.S. Securities and Exchange Commission? A) The quarterly reports may be in the company's local language. B) English or German C) English or one of the languages of the European Union D) English only 9. What is an advantage of using ratio analysis in comparing financial statements from different countries? A) Ratios are expressed as percentages, making currency differences irrelevant to the analysis. B) Ratios highlight the holding gains or losses related to currency translation. C) Purchasing power gains and losses from currency translation show up clearly in ratio analysis. D) Comparing business ratios across countries removes the effect of economic conditions and business culture. 10. Translating foreign financial statements into a convenience language: A) eliminates all readability problems for a financial analyst. B) does not always clarify accounting terminology unique to a particular country. C) is easily and inexpensively done when the convenience language is English. D) is required for all multinational corporations. 11. How would a company decide which foreign languages will be used to present its financial statements? A) Determine which language is closest to the local language so that translation is less costly. B) Choose the language based on which countries provide the greatest potential source of funds. C) Follow the language requirements of its local accounting regulatory agency. D) Select the language of the most populous country in its region of the world.

 

Paper#5997 | Written in 18-Jul-2015

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