Ch12 - Ch12 Student 1 Accounting standards of the Financial...

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Ch12 Student: ___________________________________________________________________________ 1. Accounting standards of the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) may be characterized as being based on: A. B. C. D. 2. Which of he following defines a foreign-based entity that uses a functional currency different from the local currency? I. A U.S. subsidiary in Britain maintains its accounting records in pounds sterling, with the majority of its transactions denominated in pounds sterling. II. A U.S. subsidiary in Peru conducts virtually all of its business in Latin America, and uses the U.S. dollar as its major currency. A. I. B. II. C. Both I and II. D. Neither I nor II. 3. Which indicators below are assessed in order to determine an entity's functional currency? I. Cash Flows II. Sales Prices III. Financing A. I, II, B. II, III C. I, III D. I, II, III 4. How should a change in an entity's functional currency be accounted for when the change results from a change in economic circumstances? A. B. C. D.
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5. When inflation exceeding 100% over a 3-year period occurs in a country in which a foreign subsidiary is located, which currency should the U.S. parent use as the functional currency? A. B. C. D. 6. Simon Company has two foreign subsidiaries. One is located in France, the other in England. Simon has determined the U.S. dollar is the functional currency for the French subsidiary, while the British pound is the functional currency for the English subsidiary. Both subsidiaries maintain their books and records in their respective local currencies. What methods will Simon use to convert each of the subsidiary's financial statements into U.S. dollars? A. B. C. D. 7. When the local currency of the foreign subsidiary is the functional currency, a foreign subsidiary's inventory carried at cost would be converted to U.S. dollars by: A. translation using historical exchange rates. B. remeasurement using historical exchange rates. C. remeasurement using the current exchange rate. D. translation using the current exchange rate. 8. If the functional currency is the local currency of a foreign subsidiary, what exchange rates should be used to translate the items below, assuming the foreign subsidiary is in a country which has not experienced hyperinflation over three years? A. B. C. D. 9. If the functional currency is the local currency of a foreign subsidiary, what exchange rates should be used to translate the items below, assuming the foreign subsidiary is in a country which has not experienced hyperinflation over three years? A. B. C. D.
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10. Which combination of accounts and exchange rates is correct for the translation of a foreign entity's financial statements from the functional currency to U.S. dollars? A.
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This note was uploaded on 05/26/2011 for the course ACCT 410 taught by Professor Khalib during the Spring '11 term at Strayer.

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Ch12 - Ch12 Student 1 Accounting standards of the Financial...

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