INTERNATIONAL ACCOUNTING CHAPTER 7
STUDY GUIDE 2026 COMPREHENSIVE
PRACTICE QUESTIONS ANMD CORRECT
ANSWERS WITH DETAILED RATIONALES
FOREIGN CURRENCY TRANSACTIONS,
EXCHANGE RATES, FINANCIAL
STATEMENT TRANSLATION, IFRS AND
INTERNATIONAL ACCOUNTING EXAM
PREPARATION
Excel Sources Inc. is a U.S. incorporated company. Due to change in exchange rate, it
receives $150,000 as payment against a sale of $165,000. Under the two-transaction
perspective:
A. no journal entry will be prepared on the date of sale.
B. the sale will be recorded at $150,000 on the date of sale.
C. foreign exchange loss will be recorded for $15,000.
D. Accounts Receivable will be debited for $15,000 on the date of payment. - CORRECT
ANSWER -C. foreign exchange loss will be recorded for $15,000.
Which of the following statements is true of the relationship between foreign currency
transactions, exchange rate changes, and foreign exchange gains and losses?
,A. In an export sales, depreciation of the foreign currency causes a foreign exchange
gain.
B. In an import purchase, appreciation of the foreign currency causes a foreign exchange
gain.
C. In an import purchase, depreciation of the foreign currency causes a foreign exchange
loss.
D. In an export sales, appreciation of the foreign currency causes a foreign exchange
gain. - CORRECT ANSWER -D. In an export sales, appreciation of the foreign currency
causes a foreign exchange gain.
Which of the following statements is true of intrinsic value of options?
According to the World Trade Organization, what was the size of international trade in
2011? - CORRECT ANSWER -D. $18,000,000,000,000 (18 trillion dollars)
In the years between 1990 and 2001 when global gross domestic product rose 27%, what
was the growth in global exports? - CORRECT ANSWER -B. 75%
What is a "foreign exchange rate?" - CORRECT ANSWER -A. The price to buy a
foreign currency
Which of the following statements is true about the Euro? - CORRECT ANSWER -A. It
is the currency used by all countries in the European Union.
B. It is pegged to the U.S. dollar.
, C. It is the currency required to be used in financial reporting under international
accounting standards.
ANSWER!! None of the statements above is true.
A bank exchanging foreign currency makes its profit in what manner? - CORRECT
ANSWER -D. On the difference between the buying and selling rates
King's Bank, a British company, purchases market research services from Harris
Interactive, a U.S. company. As per the terms of the contract, payment is to be made
three months later in U.S. dollars when the report is delivered. How would King's Bank
like to see the exchange rate move, assuming it isn't hedging the transaction? -
CORRECT ANSWER -B. It hopes that the British pound appreciates in value against
the U.S. dollar.
Why was there very little fluctuation in the foreign exchange rate in the period 1945-
1973? - CORRECT ANSWER -C. Countries linked their currency to the U.S. dollar,
which was backed by gold reserves.
The central bank of Country X buys and sells its own currency to ensure that the
currency is always exchanged in a ratio of 2:1 with the currency of Country Y. What can
we conclude about these two currencies? - CORRECT ANSWER -B. Country X has
pegged its currency to the currency of Country Y.
When a currency is allowed to increase or decrease freely according to market forces, the
currency is said to: - CORRECT ANSWER -C. have independent float.
For an upcoming trip, Pat wants to buy Euros at the local bank when the current
exchange rate quoted on OANDA.com was $1.563 per 1. What should Pat plan to pay for
1,000? - CORRECT ANSWER -B. more than $1,563
STUDY GUIDE 2026 COMPREHENSIVE
PRACTICE QUESTIONS ANMD CORRECT
ANSWERS WITH DETAILED RATIONALES
FOREIGN CURRENCY TRANSACTIONS,
EXCHANGE RATES, FINANCIAL
STATEMENT TRANSLATION, IFRS AND
INTERNATIONAL ACCOUNTING EXAM
PREPARATION
Excel Sources Inc. is a U.S. incorporated company. Due to change in exchange rate, it
receives $150,000 as payment against a sale of $165,000. Under the two-transaction
perspective:
A. no journal entry will be prepared on the date of sale.
B. the sale will be recorded at $150,000 on the date of sale.
C. foreign exchange loss will be recorded for $15,000.
D. Accounts Receivable will be debited for $15,000 on the date of payment. - CORRECT
ANSWER -C. foreign exchange loss will be recorded for $15,000.
Which of the following statements is true of the relationship between foreign currency
transactions, exchange rate changes, and foreign exchange gains and losses?
,A. In an export sales, depreciation of the foreign currency causes a foreign exchange
gain.
B. In an import purchase, appreciation of the foreign currency causes a foreign exchange
gain.
C. In an import purchase, depreciation of the foreign currency causes a foreign exchange
loss.
D. In an export sales, appreciation of the foreign currency causes a foreign exchange
gain. - CORRECT ANSWER -D. In an export sales, appreciation of the foreign currency
causes a foreign exchange gain.
Which of the following statements is true of intrinsic value of options?
According to the World Trade Organization, what was the size of international trade in
2011? - CORRECT ANSWER -D. $18,000,000,000,000 (18 trillion dollars)
In the years between 1990 and 2001 when global gross domestic product rose 27%, what
was the growth in global exports? - CORRECT ANSWER -B. 75%
What is a "foreign exchange rate?" - CORRECT ANSWER -A. The price to buy a
foreign currency
Which of the following statements is true about the Euro? - CORRECT ANSWER -A. It
is the currency used by all countries in the European Union.
B. It is pegged to the U.S. dollar.
, C. It is the currency required to be used in financial reporting under international
accounting standards.
ANSWER!! None of the statements above is true.
A bank exchanging foreign currency makes its profit in what manner? - CORRECT
ANSWER -D. On the difference between the buying and selling rates
King's Bank, a British company, purchases market research services from Harris
Interactive, a U.S. company. As per the terms of the contract, payment is to be made
three months later in U.S. dollars when the report is delivered. How would King's Bank
like to see the exchange rate move, assuming it isn't hedging the transaction? -
CORRECT ANSWER -B. It hopes that the British pound appreciates in value against
the U.S. dollar.
Why was there very little fluctuation in the foreign exchange rate in the period 1945-
1973? - CORRECT ANSWER -C. Countries linked their currency to the U.S. dollar,
which was backed by gold reserves.
The central bank of Country X buys and sells its own currency to ensure that the
currency is always exchanged in a ratio of 2:1 with the currency of Country Y. What can
we conclude about these two currencies? - CORRECT ANSWER -B. Country X has
pegged its currency to the currency of Country Y.
When a currency is allowed to increase or decrease freely according to market forces, the
currency is said to: - CORRECT ANSWER -C. have independent float.
For an upcoming trip, Pat wants to buy Euros at the local bank when the current
exchange rate quoted on OANDA.com was $1.563 per 1. What should Pat plan to pay for
1,000? - CORRECT ANSWER -B. more than $1,563
