Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 10, Problem 18P
A foreign subsidiary’s functional currency is its local currency, which has not experienced significant inflation. The current exchange rate at the balance sheet date is the appropriate exchange rate for translating:
| Insurance Expense | Prepaid Insurance | |
| a. | Yes | Yes |
| b. | Yes | No |
| c. | No | Yes |
| d. | No | No |
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A foreign subsidiary’s functional currency is its local currency, which has not experienced significant inflation. The current exchange rate at the balance sheet date is the appropriate exchange rate for translating:
Insurance Expense Prepaid Insurance
Yes Yes
Yes. No
No Yes
No No
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
O a.
Wages expense but not Sales to customers
O b. Sales to customers but not Wages expense
O c.
neither Wages expense nor Sales to customers
O d. Wages expense and Sales to customers
Which of the following statement is NOT true regarding a foreign currency transaction?
a. When a transaction is denominated in a foreign currency (FC) and measured in dollars, changes in exchange rates between the transaction date and the settlement date expose the domestic company to exchange gains or losses.
b. If an FC transaction is unsettled at the end of the accounting period, the exchange gains/losses should be accrued.
c. When a transaction is denominated and measured in dollars, changes in exchange rates do not expose the domestic company to exchange gains or losses.
d. Changes in exchange rates expose the domestic company to exchange gains or losses only when the company purchases goods from a foreign company.
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- A foreign subsidiary’s functional currency is its local currency, which has not experienced significant inflation. The current exchange rate at the balance sheet date is the appropriate exchange rate for translating:arrow_forwardThe exchange loss/gain due to a transaction exposure is estimated while O a. Converting a foreign currency into a domestic currency O b. Quoting a price for a foreign currency transaction O c. Entering into a transaction in foreign exchange O d. Verifying the fluctuation in the exchange ratearrow_forwardChoose the correct. In accounting for foreign currency transactions, which of the following approaches is used in the United States?a. One-transaction perspective; accrue foreign exchange gains and losses.b. One-transaction perspective; defer foreign exchange gains and losses.c. Two-transaction perspective; defer foreign exchange gains and losses.d. Two-transaction perspective; accrue foreign exchange gains and losses.arrow_forward
- In accounting for foreign currency transactions, which of the following approaches is used in the United States?a. One-transaction perspective; accrue foreign exchange gains and losses.b. One-transaction perspective; defer foreign exchange gains and losses.c. Two-transaction perspective; defer foreign exchange gains and losses.d. Two-transaction perspective; accrue foreign exchange gains and losses.arrow_forwardOn initial recognition of IFRS, a foreign currency transaction should be recorded at:A. the spot exchange rateB. Forward exchange rateC. Historical exchange rate D. All of the aboveE. None of the abovarrow_forwardWhich of the following items will result to foreign currency transaction gain/loss due to settlement or remeasurement? Foreign currency denominated non-monetary liabilities such as unearned revenue, warranty liability, premium liability and deferred tax liability. Foreign currency denominated non-monetary assets such as inventory, PPE, intangible asset or prepaid asset. Foreign currency denominated monetary items such as accounts payable, accounts receivable, notes payable, loans receivable or interest payable. Foreign currency denominated income statement accounts such as revenue, income, expense or loss.arrow_forward
- Assuming that the functional currency of a foreign subsidiary is the local currency, which of the following accounts would be translated at the current rate on the Balance Sheet date (B/S Rate)? a.Additional Paid-In Capital b.Cost of Goods Sold c.Retained Earnings d.Allowance for Doubtful Accountsarrow_forwardwhich shall be recognized for each item when foreign currency gain or loss that arises from translation of foreign currency denominated transaction to functional currency? a. inventiry b. interest expense c. accounts receivable d. unearned revenuearrow_forwardA sale of goods by a U.S. company was denominated in a foreign currency. The sale resulted in a receivable that was fixed in terms of the amount of foreign currency that would be received. Exchange rates between the dollar and the foreign currency changed so that a loss was incurred. This loss should be included as a a. Extraordinary item in the income statement b. Separate component of stockholders' equity O c. Deferred item in the balance sheet O d. Component of income from continuing operationsarrow_forward
- What is the initial measurement of foreign currency transaction? Closing rate for both monetary items and nonmonetary items. Historical rate for monetary items and closing rate for nonmonetary items Historical rate for both monetary item and nonmonetary items. Historical rate for nonmonetary items and closing rate for monetary items.arrow_forwardIf the U.S.DOLLAR is determined to be the functional currency, which of the following is usually used to restate to US$ monetary assets and liabilities to the reporting currency? I. The average exchange rate II. The historical exchange rate III. The current exchange rate A) III only. B) Either Il or III, depending on the nature of the item. C) I only. D) II only.arrow_forwardIf the foreign operations reports in the currency of hyperinflationary economy, assets and liabilities are translated at Group of answer choices Average rate Exchange rate on date of transaction Forward rate Closing ratearrow_forward
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Foreign Exchange Risks; Author: Kaplan UK;https://www.youtube.com/watch?v=ne1dYl3WifM;License: Standard Youtube License