Advanced accounting multiple-choice

ACCT 4020 Advanced Accounting Chapters 11 and 12 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Suppose the direct foreign exchange rates in U.S. dollars are: 1 Australian dollar = $1.3968 1 Chinese yuan = $0.1410 1) 1) Based on the information given above, the indirect exchange rates for the Australian dollar and the Chinese yuan (from a U.S. perspective) are: A. 0.5525 Australian dollars and 4.7103 Chinese yuan B. 0.7159 Australian dollars and 7.0922 Chinese yuan C. 1.1483 Australian dollars and 2135 Chinese yuan D. 0.1410 Australian dollars and 1.3969 Chinese yuan 2) _ 2) Based on the information given above, how many U.S. dollars must be paid for iPhones costing 500,000 Chinese yuan? A. $82,500 B. $53,000 C. $70,500 D. $64,500 3) 3) Based on the information given above, how many Australian dollars must be paid for wheat costing $200,000? A. 75,298 Australian dollars B. 90,482 Australian dollars C. 143,184 Australian dollars D. 186,340 Australian dollars 4) Upon arrival in Brazil, Karen exchanged $1,000 of U.S. currency into 5,000 Brazilian reals. While returning after her two-month visit, she exchanged her remaining 500 reals into $90 of U.S. currency. What amount of gain or loss did Karen experience on the 500 reals she held during her visit and converted to U.S. dollars at the departure date? A. No gain or loss B. Loss of $10 C. Gain of $10 D. Loss of $12 5) 5) On December 15, a U.S. company bought inventory from a European supplier. Payment is required in euros in 30 days. What exchange rate should be used to Value the payable for this transaction at year-end? A Exchange rate at purchase date B. Weighted average exchange rate for the year C. Exchange rate at settlement date D. Exchange rate at year-end 6) On September 1, Year 1, Cano & Co., a U.S. corporation, sold merchandise to a 6) _ foreign firm for 250,000 pesos. Terms of the sale require payment in pesos on February 1 Year 2. On September 1, Year 1, the spot exchange rate was $0.20 per peso. At December 31, Year 1, Cano's year end, the spot rate was $0.19, but the rate increased to $0.22 by February 1 Year 2 when payment was received. How much should Cano report as foreign exchange gain or loss in its Year 2 income statement? A $7,500 gain B. $2,500 loss C. $0 D. $5,000 gain 7) Toigo Co purchased merchandise from a vendor in England on November 20 for 7) 500,000 British pounds. Payment was due in British pounds on January 20. The spot rates to purchase one pound were as follows: November 20 $1.25 December 31 January 20 1 .17 How should the foreign currency transaction gain be reported on Toigo's financial statements at December 31? A. A gain of $40,000 in the income statement. B. Again of $25,000 as a separate component of stockholders' equity. C. Again of $40,000 as a separate component of stockholders' equity. D. Again of $25,000 in the income statement. 8) Which of the following is an example of hedging? A. A company that makes and sells boats invests in a foreign company that makes and sells automobiles. B.) A company with a receivable denominated in foreign currency units offers to sell an equal amount of that foreign currency at a set price. C. A company with a payable denominated in foreign currency units offers to buy an equal amount of that foreign currency at a set price. D. A company with a receivable denominated in foreign currency units borrows an equivalent amount of currency to the receivable but denominated in a third unrelated currency 9) At what time can you NOT purchase a hedge? A. At the purchase order date. B. At the exchange date. C. In between the purchase order date and the exchange date. D. After the contract is completed. 10) The following exchange rates between the U.S. dollar and Japanese yen are given below. 10) Dec 1, 2018 Dec 31, 2018 Jan 31, 2019 $1 - 154 yen $1139 yen $1 145 yen Based on the preceding information, which of the following is true of the dollar's movement vis- -vis Japanese yen during the given periods? Dec 1-31 A. Dollar strengthened B. Dollar strengthened C. Dollar weakened D. Dollar weakened Jan 1-31 Dollar strengthened Dollar weakened Dollar strengthened Dollar weakened 11) On December 10, 2018, New York based Empire Corporation purchased goods from 11). a Spanish firm for 100,000 euros, to be paid on January 10, 2019. The transaction is denominated in euros. Empire's fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are: December 10, 2018 December 31, 2018 January 10, 2019 1 euro = $1.03 1 euro $1.02 1 euro $1.05 Based on the preceding information, what journal entry would Empire make on December 31, 2019 to revalue foreign currency payable to equivalent U.S. dollar value. A Accounts Payable 1.000 Foreign Currency Transaction Gain 1,000 B Foreign Currency Transaction Loss 1,000 Accounts Payable Transaction Loss 1,000 c. Accounts Payable 3,000 Foreign Currency Transaction Gain 3,000 D. Foreign Currency Transaction Loss 3,000 Accounts Payable Transaction Loss 3,000 12) 12) On October 1 of the current year, a U.S. company sold merchandise on account to a British company for 2,000 pounds (exchange rate, 1 pound $1.43). At the company's December 31 fiscal year end, the exchange rate was 1 pound $1.45 The exchange rate was 1 pound = $1.50 on collection in January of the subsequent year. What amount would the company recognize as a gain or loss from foreign currency transactions when the receivable is collected? A. $140 gain B. SO C. $100 gain D. $140 loss 13) Under U.S. GAAP, in preparing consolidated financial statements of a U.S.parent 13) company with a foreign subsidiary, the foreign subsidiary's functional currency is the currency: A. Of the country in which the subsidiary is located. B. Of the country in which the parent is located. C. In which the subsidiary maintains its accounting records. D. Of the environment in which the subsidiary primarily generates and expends cash. 14) 14) When translating foreign currency financial statements into the reporting Currency, which of the following items would not be translated using the current (year-end) rates? A. Common stock B. Fixed assets C. Notes payable D. Accounts receivable 15) 15) When remeasuring foreign currency financial statements into the functional, which of the following items would be remeasured using historical exchange rates A Bonds payable B. Accrued liabilities C. Inventories carried at cost. D. Marketable equity securities reported at market values 16) 16) A balance arising from the translation or remeasurement of a subsidiary's foreign currency financial statements is reported in the consolidated income statement when the subsidiary's functional currency is the Foreign Currency Reporting currency Yes vo No No 17) 17) 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 Saleries Expense Soles to External Customers Yes Yes Yes Yes No 18) A company from the United Kingdom uses British pounds in its normal operations, 18) reports in the European Union in euros, and reports in the United States in US dollars. The company is owned by a private equity firm in Japan. What is the company's functional currency? A. The U.S. dollar. B. The Japanese yen. C. The British pound D. The euro. 19) Certain balance sheet accounts of a foreign subsidiary of Rowan, Inc., at December 19) _ 31 have been translated into U.S. dollars as follows: Notes receivable, long-term Prepaid rent Patent Totals Translated At Current Rates Historical Rates $240,000 $200,000 85,000 80.000 150.000 170,000 $475,000 $450,000 The subsidiary's functional currency is the currency of the country in which it is located. What total amount should be included in Rowan's December 31 consolidated balance sheet for the above accounts? A $495,000 B. $455,000 C. $450,000 D. $475,000 20) in which of the following cases should the functional currency of the foreign 20) subsidiary be the reporting currency of the U.S.parent US dollars)? A. The subsidiary makes the majority of the transactions in its home country's currency B. The US dollar is experiencing high inflation C. The subsidiary's home currency is experiencing high inflation D. The subsidiary is in bankruptcy proceedings