2
Advanced Financial Accounting Final Exam Review || || || || || ||
questions with accurate detailed answers || || || ||
One of our subsidiary companies maintains its accounting records in Euros and designates the
|| || || || || || || || || || || || || ||
British pound as its functional currency. Your computations yield a translation loss of $7,000 and
|| || || || || || || || || || || || || || ||
a remeasurement gain of $5,000. What amount should you report as a gain (loss) in your income
|| || || || || || || || || || || || || || || || ||
statement? - ✔✔$5,000; Remeasurement = income STMT || || || || || ||
An item that should be remeasured using the historical exchange rate is: - ✔✔Prepaid expenses
|| || || || || || || || || || || || || ||
A foreign subsidiary's functional currency is its local currency, which has not experienced
|| || || || || || || || || || || || ||
significant inflation. The weighted average exchange rate for the current year would be the
|| || || || || || || || || || || || || ||
appropriate exchange rate for translating: - ✔✔Salaries expense: Yes; Sales to external|| || || || || || || || || || || ||
customers: Yes ||
Gordon Ltd., a 100% owned British subsidiary of a U.S. parent company, reports its financial
|| || || || || || || || || || || || || || ||
statements in local currency, the British pound. A local newspaper published the following U.S.
|| || || || || || || || || || || || || ||
exchange rates to the British pound at year end: || || || || || || || ||
Current Rate$1.70; Historical rate (acquisition)1.50; Average rate1.60; Inventory (FIFO)1.55
|| || || || || || || || ||
Which currency rate should Gordon use to convert its income statement to U.S. dollars at year
|| || || || || || || || || || || || || || || ||
end? - ✔✔$1.60: Avg Rate || || || ||
The functional currency is the currency: - ✔✔Of the environment in which a subsidiary primarily
|| || || || || || || || || || || || || || ||
generates and expends cash || || ||
Gains and losses from remeasuring a foreign subsidiary's financial statements should be reported:
|| || || || || || || || || || || || ||
- ✔✔In current income
|| || ||
Assume that your subsidiary operated independently of the parent company. Which of the
|| || || || || || || || || || || || ||
following is true? - ✔✔Translation adjustments have an immediate effect on cash flows: No;
|| || || || || || || || || || || || || ||
Translation adjustments should be reflected in earnings: No || || || || || || ||
,2
During the translation process, the current year change to the cumulative translation adjustment is
|| || || || || || || || || || || || || ||
a function of which of the following relationships of the subsidiary? - ✔✔Its total assets minus
|| || || || || || || || || || || || || || || ||
total liabilities ||
If a subsidiary's financial statements are translated, the translation gain (loss) is related to changes
|| || || || || || || || || || || || || || ||
in: - ✔✔The subsidiary's stockholders' equity
|| || || || ||
Which of the following statements is true regarding the cumulative translation adjustment? -
|| || || || || || || || || || || || ||
✔✔The cumulative translation adjustment account is reported in accumulated other
|| || || || || || || || || ||
comprehensive income and is transferred into reported earnings when the transaction to which it || || || || || || || || || || || || || ||
relates affects reported earnings || || ||
Which of the following statements is correct? || || || || || ||
Select one: ||
A. The functional currency must always be the currency of the US parent company.
|| || || || || || || || || || || || ||
B. Non-US subsidiaries always record transactions in $US.
|| || || || || || ||
C. If the foreign-currency-denominated subsidiary financial statements are already in the
|| || || || || || || || || || ||
functional currency, but not in the parent's currency, then the financial information must be
|| || || || || || || || || || || || || ||
"translated" into the parent's currency. || || || ||
D. None of the above - ✔✔C. If the foreign-currency-denominated subsidiary's financial
|| || || || || || || || || || || ||
statements are already in the functional currency, but not in the parent's currency, then the
|| || || || || || || || || || || || || || ||
financial information must be "translated" into the parent's currency.
|| || || || || || || ||
Which of the following is not a factor that must be considered in determining the functional
|| || || || || || || || || || || || || || || ||
currency? - ✔✔In which currency will fluctuations in $US value be minimized || || || || || || || || || || ||
Which of the following best describes current GAAP with respect to the translation process? -
|| || || || || || || || || || || || || || ||
✔✔Assets and liabilities are translated at the exchange rate at the balance sheet date regardless of
|| || || || || || || || || || || || || || || ||
when they arose. || ||
, 2
Which of the following best describes the translation of financial statements? - ✔✔Common
|| || || || || || || || || || || || ||
stock and APIC accounts are translated at their respective historical exchange rates.
|| || || || || || || || || || ||
Which of the following best describes the cumulative translation adjustment? - ✔✔The
|| || || || || || || || || || || ||
cumulative translation adjustment is a plug figure to balance the trial balance.
|| || || || || || || || || || ||
Which of the following statements is true?
|| || || || || ||
Select one: ||
A. Direct computation of the translation adjustment only involves the current year and begins at a
|| || || || || || || || || || || || || || || ||
zero amount. ||
B. Net income is multiplied by the difference between the end-of-year exchange rate and the
|| || || || || || || || || || || || || || ||
beginning-of-year exchange rate. || ||
C. Net income is multiplied by the difference between the end-of-year exchange rate and the
|| || || || || || || || || || || || || || ||
average exchange rate. || ||
D. The cumulative translation adjustment computation contains an adjustment to reflect changes
|| || || || || || || || || || || ||
in the fair value of the net assets of the company. - ✔✔C. Net income is multiplied by the
|| || || || || || || || || || || || || || || || || || ||
difference between the end-of-year exchange rate and the average exchange rate.
|| || || || || || || || || ||
A highly inflationary economy is best defined as - ✔✔One which has a cumulative inflation of
|| || || || || || || || || || || || || || || ||
over 100% over a three-year period.
|| || || || ||
Which of the following best describes the accounting for nonmonetary assets and liabilities? -
|| || || || || || || || || || || || || ||
✔✔They are reported at their historical cost. || || || || || ||
Which of the following best describes the accounting for nonmonetary assets and liabilities? -
|| || || || || || || || || || || || || ||
✔✔Revenues and expenses arising from these assets are translated at historical cost.|| || || || || || || || || || ||
Which of the following statements is not true?
|| || || || || || ||
Select one: ||
A. Gains and losses arising from remeasurement are reflected in current income.
|| || || || || || || || || || ||
Advanced Financial Accounting Final Exam Review || || || || || ||
questions with accurate detailed answers || || || ||
One of our subsidiary companies maintains its accounting records in Euros and designates the
|| || || || || || || || || || || || || ||
British pound as its functional currency. Your computations yield a translation loss of $7,000 and
|| || || || || || || || || || || || || || ||
a remeasurement gain of $5,000. What amount should you report as a gain (loss) in your income
|| || || || || || || || || || || || || || || || ||
statement? - ✔✔$5,000; Remeasurement = income STMT || || || || || ||
An item that should be remeasured using the historical exchange rate is: - ✔✔Prepaid expenses
|| || || || || || || || || || || || || ||
A foreign subsidiary's functional currency is its local currency, which has not experienced
|| || || || || || || || || || || || ||
significant inflation. The weighted average exchange rate for the current year would be the
|| || || || || || || || || || || || || ||
appropriate exchange rate for translating: - ✔✔Salaries expense: Yes; Sales to external|| || || || || || || || || || || ||
customers: Yes ||
Gordon Ltd., a 100% owned British subsidiary of a U.S. parent company, reports its financial
|| || || || || || || || || || || || || || ||
statements in local currency, the British pound. A local newspaper published the following U.S.
|| || || || || || || || || || || || || ||
exchange rates to the British pound at year end: || || || || || || || ||
Current Rate$1.70; Historical rate (acquisition)1.50; Average rate1.60; Inventory (FIFO)1.55
|| || || || || || || || ||
Which currency rate should Gordon use to convert its income statement to U.S. dollars at year
|| || || || || || || || || || || || || || || ||
end? - ✔✔$1.60: Avg Rate || || || ||
The functional currency is the currency: - ✔✔Of the environment in which a subsidiary primarily
|| || || || || || || || || || || || || || ||
generates and expends cash || || ||
Gains and losses from remeasuring a foreign subsidiary's financial statements should be reported:
|| || || || || || || || || || || || ||
- ✔✔In current income
|| || ||
Assume that your subsidiary operated independently of the parent company. Which of the
|| || || || || || || || || || || || ||
following is true? - ✔✔Translation adjustments have an immediate effect on cash flows: No;
|| || || || || || || || || || || || || ||
Translation adjustments should be reflected in earnings: No || || || || || || ||
,2
During the translation process, the current year change to the cumulative translation adjustment is
|| || || || || || || || || || || || || ||
a function of which of the following relationships of the subsidiary? - ✔✔Its total assets minus
|| || || || || || || || || || || || || || || ||
total liabilities ||
If a subsidiary's financial statements are translated, the translation gain (loss) is related to changes
|| || || || || || || || || || || || || || ||
in: - ✔✔The subsidiary's stockholders' equity
|| || || || ||
Which of the following statements is true regarding the cumulative translation adjustment? -
|| || || || || || || || || || || || ||
✔✔The cumulative translation adjustment account is reported in accumulated other
|| || || || || || || || || ||
comprehensive income and is transferred into reported earnings when the transaction to which it || || || || || || || || || || || || || ||
relates affects reported earnings || || ||
Which of the following statements is correct? || || || || || ||
Select one: ||
A. The functional currency must always be the currency of the US parent company.
|| || || || || || || || || || || || ||
B. Non-US subsidiaries always record transactions in $US.
|| || || || || || ||
C. If the foreign-currency-denominated subsidiary financial statements are already in the
|| || || || || || || || || || ||
functional currency, but not in the parent's currency, then the financial information must be
|| || || || || || || || || || || || || ||
"translated" into the parent's currency. || || || ||
D. None of the above - ✔✔C. If the foreign-currency-denominated subsidiary's financial
|| || || || || || || || || || || ||
statements are already in the functional currency, but not in the parent's currency, then the
|| || || || || || || || || || || || || || ||
financial information must be "translated" into the parent's currency.
|| || || || || || || ||
Which of the following is not a factor that must be considered in determining the functional
|| || || || || || || || || || || || || || || ||
currency? - ✔✔In which currency will fluctuations in $US value be minimized || || || || || || || || || || ||
Which of the following best describes current GAAP with respect to the translation process? -
|| || || || || || || || || || || || || || ||
✔✔Assets and liabilities are translated at the exchange rate at the balance sheet date regardless of
|| || || || || || || || || || || || || || || ||
when they arose. || ||
, 2
Which of the following best describes the translation of financial statements? - ✔✔Common
|| || || || || || || || || || || || ||
stock and APIC accounts are translated at their respective historical exchange rates.
|| || || || || || || || || || ||
Which of the following best describes the cumulative translation adjustment? - ✔✔The
|| || || || || || || || || || || ||
cumulative translation adjustment is a plug figure to balance the trial balance.
|| || || || || || || || || || ||
Which of the following statements is true?
|| || || || || ||
Select one: ||
A. Direct computation of the translation adjustment only involves the current year and begins at a
|| || || || || || || || || || || || || || || ||
zero amount. ||
B. Net income is multiplied by the difference between the end-of-year exchange rate and the
|| || || || || || || || || || || || || || ||
beginning-of-year exchange rate. || ||
C. Net income is multiplied by the difference between the end-of-year exchange rate and the
|| || || || || || || || || || || || || || ||
average exchange rate. || ||
D. The cumulative translation adjustment computation contains an adjustment to reflect changes
|| || || || || || || || || || || ||
in the fair value of the net assets of the company. - ✔✔C. Net income is multiplied by the
|| || || || || || || || || || || || || || || || || || ||
difference between the end-of-year exchange rate and the average exchange rate.
|| || || || || || || || || ||
A highly inflationary economy is best defined as - ✔✔One which has a cumulative inflation of
|| || || || || || || || || || || || || || || ||
over 100% over a three-year period.
|| || || || ||
Which of the following best describes the accounting for nonmonetary assets and liabilities? -
|| || || || || || || || || || || || || ||
✔✔They are reported at their historical cost. || || || || || ||
Which of the following best describes the accounting for nonmonetary assets and liabilities? -
|| || || || || || || || || || || || || ||
✔✔Revenues and expenses arising from these assets are translated at historical cost.|| || || || || || || || || || ||
Which of the following statements is not true?
|| || || || || || ||
Select one: ||
A. Gains and losses arising from remeasurement are reflected in current income.
|| || || || || || || || || || ||
