Chapter 13 Test Bank FOREIGN CURRENCY FINANCIAL STATEMENTS Multiple Choice Questions LO1 1.A US firm has a Belgian subsidiary that uses the British poundas its functional currency. Under FASB statement No. 52, theUS dollar from Belgian unit’s point of view will be a.a foreign currency.b.its local currencyc.its current rate method currencyd.its reporting currency LO12.Selvey Inc. is a completely owned subsidiary of ParsfieldIncorporated a US firm. The country where Selvey operates isdeemed to have a highly inflationary economy under FASBstatement No. 52. Therefore, the functional currency is LO1 3.All of the following factors would be used to define afunctional currency, except LO24.When the financial statements of a foreign subsidiary one yearafter acquisition are consolidated with the parent company,Retained Earnings is
LO2 5.Peachey has a foreign subsidiary, Schrivener Corporation ofGermany, whose functional currency is the euro. On December 31,19X2, Schrivener has an account receivable denominated inBritish pounds. Which one of the following statements is true? a.Because all accounts of the subsidiary are translated intoUS dollars at the current rate, the Account Receivable isnot adjusted on the subsidiary’s books before translation.b.The Account Receivable is remeasured into the functionalcurrency and remeasurement obviates translation.c.The Account Receivable is first adjusted to reflect thecurrent exchange rates in euros and then translated at thecurrent rate into dollars.d.The Account Receivable is adjusted to euros at the currentexchange rate and any resulting gain or loss is included asa translation adjustment in the stockholders’ equitysection of the subsidiary’s separate balance sheet. LO26.Paskin’s Corporation’s wholly-owned Canadian subsidiary has aCanadian dollar functional currency. In translating its accountbalances into US dollars for reporting purposes, which one ofthe following accounts would be translated at historicalexchange rates?
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- Fall '14
- Balance Sheet, Generally Accepted Accounting Principles, United States dollar