501 Chapter 10 MC

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Which method of translating a foreign subsidiary's financial statements is correct? A. Historical rate method. B. Working capital method. C. Current rate method. D. Remeasurement. E. Temporal method.

C. Current rate method

Under the temporal method, which accounts are remeasured using current exchange rates?

Cash, receivables, and most liabilities.

A net liability balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true? A. There is no translation adjustment. B. There is a transaction loss. C. There is a transaction gain. D. There is a negative translation adjustment. E. There is a positive translation adjustment.

D. There is a negative translation adjustment.

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

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.

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.

When preparing a consolidating statement of cash flows, which of the following statements is false? A. All operating activity items are translated at an average exchange rate for the period. B. A change in accounts receivable is translated using the current rate. C. A change in long-term debt is translated using the historical rate at the date of the change. D. Dividends paid are translated using the historical rate at the date of the payment. E. All items follow translation rates used for the balance sheet and the income statement.

B. A change in accounts receivable is translated using the current rate

What is a company's functional currency?

A. The currency of the primary economic environment in which it operates.

What exchange rate should have been used in translating revenues and expenses for 2011?

Weighted Average rate for the year

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.


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