Ch. 11

1. Translation exposure is the potential for an increase or decrease in the parents reported net income and net worth caused by a change in exchange rates since the last translation. True or False

2. Based on the text, Ganado Chinas functional currency is:
   1. The yuan
   2. The dollar
   3. The euro
   4. None of the above

3. The functional currency of a firm that purchases a majority of inputs in the firms reporting currency and bases its pricing decisions on a markup of those costs, translated into local currency, likely has a functional currency that is:
   1. The local currency
   2. The reporting currency
   3. Translated using the current rate method
   4. None of the above

4. Based on the text, Ganado Europe should probably use:
   1. The US dollar as its local currency
   2. The US dollar as its functional currency
   3. Translation using the current method
   4. Remeasurement using the temporal method
   5. None of the above

5. In both the current rate and temporal methods, equity is converted at the:
   1. Current rate
   2. Historic rate
   3. Either the current rate or the historic rate
   4. Neither the current rate nor the historic rate

6. Based on the text, the main difference between the Current Rate and Temporal Methods in terms of converting Balance Sheet items are the rates used for:
   1. Cash and Accounts Receivable
   2. Inventories and Property, Plant and Equipment
   3. Short and Long Term Debt
   4. Common Stock (including APIC)