F2 - Foreign Currency Accounting

Question 1

Which method of foreign currency adjustment directly impacts the income statement?

Answer 1

Remeasurement (“dysfunctional”) method; find R/E number and plug income statement to get there

Question 2

The functional currency is defined as:

Answer 2

The currency in which the company primarily generates and expends cash

Question 3

Gains from foreign currency fluctuations in transactions with unaffiliated parties are recognized on which financial statement?

Answer 3

Income statement

Question 4

What type of loss should be reported in a stockholders’ equity contra account?

Answer 4

Cumulative foreign exchange translation losses

Question 5

Under what circumstances would foreign currency fluctuations in transactions with unaffiliated parties not be recognized?

Answer 5

Never; foreign exchange transactions gains and losses are generally included in determining net income for the period in which exchange rates change

Question 6

If the functional currency of the company is the local currency in which the company operates, at what exchange rate should the assets and liabilities be reported?

Answer 6

Spot rate

Question 7

If the functional currency of the company is the local currency in which the company operates, at what exchange rate should income statement items be reported?

Answer 7

Weighted-average

Question 8

When translating foreign currency financial statements into the reporting currency, which items would not be translated using current (year-end) rates?

Answer 8

Any equity accounts (common stock and APIC)

Question 9

At what exchange rate should a receivable be recorded for goods sold on account?

Answer 9

Spot rate of the transaction date