Chapter 08 Translation of Foreign Currency Financial Statements
When preparing a consolidating statement of cash flows, which of the following statements is false?
A change in accounts receivable is translated using the current rate
Under the temporal method, how would cost of goods sold be remeasured?
A combination of historical rates
Where is the disposition of a translation loss reported in the parent company's financial statements
Accumulated other comprehensive income
Under the current rate method, depreciation expense would be translated at what rate
Average rate
Under the current rate method, how would cost of goods sold be translated
Average rate
Under the current rate method, retained earnings would be translated at what rate
Composite amount
Under the temporal method, retained earnings would be remeasured at what rate?
Composite amount
A highly inflationary economy is defined as
Cumulative 3-year inflation in excess of 100%.
Under the current rate method, inventory at market would be translated at what rate
Current rate
Under the current rate method, property, plant & equipment would be translated at what rate
Current rate
Under the temporal method, inventory at market would be remeasured at what rate?
Current rate
Which method of translating a foreign subsidiary's financial statements is correct
Current rate method
Where is the disposition of a remeasurement gain or loss reported in the parent company's financial statements
Net income/loss in the income statement
If a subsidiary is operating in a highly inflationary economy, how are the financial statements to be restated?
Remeasurement
When consolidating a foreign subsidiary, which of the following statements is true
Subsidiary's cumulative translation adjustment is carried forward to the consolidated balance sheet.
For a foreign subsidiary that uses the U.S. dollar as its functional currency, what method is required to ready the financial statements for consolidation?
Temporal Method
Which method of remeasuring a foreign subsidiary's financial statements is correct
Temporal method
When preparing a consolidation worksheet for a parent and its foreign subsidiary accounted for under the equity method, which of the following statements is false?
The allocations of excess of fair value over book value at the date of acquisition are eliminated.
A historical exchange rate for common stock of a foreign subsidiary is best described as
The rate when the common stock was originally issued for the acquisition transaction
A net asset balance sheet exposure exists and the foreign currency depreciates. Which of the following statements is true?
There is a negative translation adjustment
A net liability balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true?
There is a negative translation adjustment
A net asset balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true?
There is a positive translation adjustment
A net liability balance sheet exposure exists and the foreign currency depreciates. Which of the following statements is true?
There is a positive translation adjustment
The translation adjustment from translating a foreign subsidiary's financial statements should be shown as
a component of stockholders' equity in the consolidated balance sheet.
In accounting, the term translation refers to
a procedure to prepare a foreign subsidiary's financial statements for consolidation.
Which accounts are remeasured using current exchange rates?
cash, receivables, and most liabilities
Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary's functional currency was the U.S. dollar. What must Dilty do to ready the subsidiary's financial statements for consolidation?
remeasure them
What is a company's functional currency
the currency of the primary economic environment in which it operates.
According to U.S. GAAP for a local currency perspective, which method is usually required for translating a foreign subsidiary's financial statements into the parent's reporting currency?
the current rate method
In translating a foreign subsidiary's financial statements, which exchange rate does the current method require for the subsidiary's assets and liabilities?
the exchange rate in effect as of the balance sheet date
Which accounts are translated using current exchange rates?
all assets and liabilities
Under the current rate method, common stock would be translated at what rate
Historical rate
Under the temporal method, common stock would be remeasured at what rate
Historical rate
Under the temporal method, depreciation expense would be remeasured at what rate?
Historical rate
Under the temporal method, property, plant & equipment would be remeasured at what rate
Historical rate.
Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary's functional currency was the U.S. dollar. Which one of the following statements would justify this conclusion?
Most of the subsidiary's sales and purchases were with companies in the U.S.