Chapter 8 - Test Bank

Chapter 8 - Test Bank - Chapter 08 Translation of Foreign...

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Chapter 08 - Translation of Foreign Currency Financial Statements Chapter 08 Translation of Foreign Currency Financial Statements Multiple Choice Questions 1. In accounting, the term translation refers to A. the calculation of gains or losses from hedging transactions. B. the calculation of exchange rate gains or losses on individual transactions in foreign currencies. C. the procedure required to identify a company's functional currency. D. the calculation of gains or losses from all transactions for the year. E. a procedure to prepare a foreign subsidiary's financial statements for consolidation. 2. What is a company's functional currency ? 3. 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? 4. In translating a foreign subsidiary's financial statements, which exchange rate does the current method require for the subsidiary's assets and liabilities? 8-1
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Chapter 08 - Translation of Foreign Currency Financial Statements 5. The translation adjustment from translating a foreign subsidiary's financial statements should be shown as A. an asset or liability (depending on the balance) in the consolidated balance sheet. B. a revenue or expense (depending on the balance) in the consolidated income statement. C. a component of stockholders' equity in the consolidated balance sheet. D. a component of cash flows from financing activities in the consolidated statement of cash flows. E. an element of the notes which accompany the consolidated financial statements. Westmore, Ltd. is a British subsidiary of a U.S. company. Westmore's functional currency is the pound sterling. The following exchange rates were in effect during 2011:
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