Advanced Accounting Final

Direct Quote

# of US dollars needed to buy one unit of FC

Purpose Restricted

Assets must be used for specific purpose

When the strike price for a foreign currency option is the same as the spot rate the foreign currency option is

At the money

Forward Points

Difference between forward rate and spot rate

An annual expense paid in the 4th quarter would only be expensed in the 4th quarter is an example of

Discrete

Strike Price

Exchange Rate used if holder exercises option

Which of the following is required to be disclosed by geographic area?

Revenues from external customers

Which is a company NOT required to disclose, even if it is material?

Revenues generated from export sales

Functional Currency

The currency of the foreign entity primary economic operating environment

For a US based company, which of the following would be an acceptable presentation of countries for providing information by geographic area?

United States, Mexico, Japan, All Other Countries

Program Services

activities that result in goods or services being distributed to beneficiaries, customers, or members that fulfill the purpose or mission of the NFP.

Call Option

allows holder to purchase the FC

Put Option

allows holder to sell the FC

Under the temporal method, revenues that are earned evenly throughout the year are translated using

the average-for-the-year exchange rate.

Which of the following statements is true for the translation process using the current rate method?

A translation adjustment is created by the change in the relative value of a subsidiary's net assets caused by exchange rate fluctuations

The accounting system must keep track of the acquisition date exchange rates related to those assets that are translated at

historical exchange rates under the temporal method

The value of the euro can best be described as being

pegged to the U.S. dollar through central bank intervention.

The functional currency of a foreign entity is defined as the

primary currency of the foreign entity's operating environment.

When the temporal method of translation is appropriate, the resulting translation adjustment must be

recognized as a gain or loss in net income.

An unrealized foreign exchange loss on a foreign currency account receivable that results from a depreciation in the foreign currency from the date of sale to the balance sheet date is

recognized in net income.

A U.S.-based company must use the temporal method to translate the financial statements of a foreign subsidiary whose functional currency is

the U.S. dollar.

Exposure to translation adjustment exists for those foreign currency balances that are translated at

the current exchange rate.

Under the temporal method of translation, assets carried on the foreign entity's balance sheet at a current or future value are translated using

the current exchange rate.

`Supporting Activities

typically general and administrative, fundraising, and membership development.

Foreign exchange gains and losses that arise from revaluing foreign currency balances at the balance sheet date are

unrealized but recognized as a component of net income.

In consolidating a foreign subsidiary, the excess of fair value over book value must be translated into the parent's currency and

a translation adjustment related to the excess must be recognized in the consolidation worksheet.

If functional currency = reporting currency

Foreign currency is remeasured into reporting currency using the temporal method

Which of the following information items with regard to a major customer must be disclosed?

The operating segment making sales to the major customer

How should material seasonal variations in revenue be reflected in interim financial statements?

The seasonal nature should be disclosed, and the interim report should be supplemented with a report on the 12-month period ending at the interim date for both the current and preceding years

A company accrues interest payable on a foreign currency borrowing at the end of the year. When the foreign currency-denominated interest is paid, the difference in the amount of accrued interest and the amount actually paid resulting from a change in the exchange rate should be recognized as

a foreign exchange gain or loss.

Translating an asset on a foreign subsidiary's balance sheet at the current exchange rate results in

a positive translation adjustment when the foreign currency has appreciated.

Translation adjustments included in other comprehensive income are

accumulated in a stockholders' equity account on the consolidated balance sheet.

Under the current rate method of translation

all liabilities are translated at the current exchange rate.

Forward Rate

Price available today at which foreign currency can be bought/sold in future

Temporal Method

Produce US dollar statements as if they had been using US dollars all along

Independent Float

value of the currency is allowed to freely fluctuate

If functional currency DOES NOT EQUAL reporting currency

Foreign currency is translated into the reporting currency using the current rate

What is Stockholders Equity translated at under current rate method

Historical Rate

Indirect Quote

How much FC is required to buy One US Dollar (1 divided by direct quote)

An annual expense paid in the 4th quarter partially expensed in all quarters is an example of

Integral

Which of the following does US GAAP NOT consider to be an objective of segment reporting?

It helps users make comparisons between a segment of one enterprise and a similar segment of another enterprise

Permanently Restricted Assets

Must be invested permanently, with the investment income available to use in the future

Time Restricted Assets

Must be used at the specified time

If a foreign entity is in a highly inflationary economy

Must us the temporal method

If Forward < Spot

Negative Forward Points, Discount

Decrease in Stockholders Equity is

Negative Translation Adjustment

If total exposed assets > liabilities

Net Asset Exposure

If total exposed liabilities > assets

Net Liability Exposure

Option Premium

Options are purchased by paying

If Forward > Spot

Positive Forward Points, Premium

Foreign Currency Exchange Rate

Price at which foreign currency can be acquired or sold

Spot Rate

Price of FC today

An unrealized foreign exchange loss on a foreign currency account receivable that results from a depreciation in the foreign currency from the date of sale to the balance sheet date is

Recognized in Net Income

For interim financial reporting, a gain from the sale of land occurring in the second quarter should be?

Recognized in the second quarter

Sales revenue from a foreign currency export sale is not adjusted after the date of sale.

True

A U.S. importer has a foreign currency-denominated import purchase. With regard to the difference in the amount of U.S. dollars that could have been paid on the date of purchase and the amount of U.S. dollars actually paid on the date of payment, the U.S. importer should recognize

a foreign exchange gain or loss in net income.

In assessing the indicators provided by the FASB for determining the functional currency of a foreign entity, the FASB

provides no guidance with regard to how the indicators should be weighted

Net cash from operations reported in the translated statement of cash flows

will be the same regardless of whether the current rate method or temporal method is used.